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SEPTEMBER
Engaging the BAME Social Enterprise Sector in Social Investment
Engaging the BAME Social Enterprise Sector in Social Investment A Report By Black South West Network For Connect Fund
This research and report were developed by researchers Malu Villela and Angelique Retief.
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Engaging the BAME Social Enterprise Sector in Social Investment
This research project aim was to explore the BAME social enterprise sector across the South West of England and understand the barriers and challenges faced by BAME social entrepreneurs in accessing social investment. The research addressed the following topics: •• •• ••
Main characteristics, needs and challenges of the BAME social enterprise community; Barriers to access social investment and changes needed to overcome these barriers; Opportunities for BSWN and broader ecosystem to support BAME social enterprises.
Methodology The research was comprised of an online survey, a focus group with BAME social entrepreneurs, another with social investors, as well as 1-1 semi-structured interviews with BAME entrepreneurs, social investors and intermediaries. The following questions guided the research: •• •• •• ••
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What is the size and scope of the BAME-led social enterprise sector in the South West? What are the main support needs within the BAME social enterprise community that need to be addressed? What are the challenges and potential opportunities for BAME-led social enterprises and entrepreneurs in the South West? How accessible are social investment products to the BAME community? What barriers BAME social entrepreneurs face in accessing the social investment sector? What changes are needed to enable a better access of BAME social entrepreneurs to social investment? How could BSWN support and develop the ecosystem for BAME-led social enterprises in the South West?
Engaging the BAME Social Enterprise Sector in Social Investment
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Barriers to Access Access to information and support
Partnerships, networks and social capital
Information distribution to the BAME community is poor regarding social investment. The inequalities across different areas of the city has led to unequal access to support for some social entrepreneurs. Because most of the support networks consist mainly of the white middle-class working in the centre of town, two social networks which are very different have developed, and this divide is prevalent in the entrepreneurial hubs in Bristol. A lack of role models which resonate with BAME social entrepreneurs was noted a key issue, and thus a lack of successful black people in workshops do not resonate with the BAME entrepreneurs attending them.
While social capital is a crucial precondition for opportunities for investment, the research has found a fragmented network in which most BAME social enterprises have very few partners. Reasons presented were around issues of organisational sovereignty and competition for resources; a lack of communication and relationship issues; as well as the demands of their goals which can lead to organisations working in silos. Whilst not all BAME organisations are going to be able to collaborate because they have different outlooks or ways of operating, there is a call for a social investment network and a greater role for intermediaries who could provide needs assessments.
Availability of resources BAME-led social enterprises tend to respond to a need and therefore develop without the initial capital. In addition, due to the nature of their business and a lack of resources, many social enterprises only have one person to manage everything and thus do not have the capacity in terms of time to complete the process of applying for social investment.
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Engaging the BAME Social Enterprise Sector in Social Investment
Diagnostic tools
Culture
Demonstrating evidence of impact is critical to gaining buy-in from stakeholders and investors therefore stated that many organisations are not impact ready. Because they are not, immense support from investors and intermediaries is often required in ensuring they are. BAME-led social enterprises however, because they are smaller (particularly those who are in the early stages of their development), do not have the capacity to evidence this impact. In other words, younger organisations would not have the impact data, nor would more mature organisations who lack resources have the capacity to evidence it.
Social investment reflects mainstream finance which is predominantly white. Representation in all aspects of the sector is poor. In addition, quite ironically, this applies to consultation meetings regarding the BAME community in which quite often there are only one or two representatives (if any). These structural/ institutional conditions need challenging in order to recognise the particular set of challenges faced by the BAME community, and the context in which their organisations operate. While the governance practices of BAME-led organisations should not be seen to be different to those of other organisations, the context in which those organisations provide their services should be understood.
Relationship with investors Internal Capacity The perceived loss of independence accompanying social investment is a central challenge for social entrepreneurs and their relationship with investors. Those who mentioned that their relationship with social investors was non-existent, saw a lack of information as well as lack of intermediaries between communities and social investors as reasons for this. Most, therefore, stated that greater information-sharing would ensure that social entrepreneurs understand social investment. Particularly that the pursuit of it need not be accompanied by reduced autonomy but could instead provide greater independence through its support to create a sustainable organisation. Income Generation For many entrepreneurs, the problem lies in their ability to generate income and in turn, their ability to make repayments on an investment. The nature of BAME organisations and the services they often deliver means they are often smaller and less likely to have a product to sell. Due to their very nature of being a social enterprise, these organisations need to be equitable and are thus often forsaking on price (delivering products and services at a reduced rate). This draws on resources making income generation challenging.
While the issue of capacity is not unique to the BAME sector, the areas in which BAME communities are, and thus where their businesses are, is a reflection of the challenges they face. Capacity, knowledge, systems development and people (in terms of their availability and skills) were noted as key challenges to success. Because most social enterprises do not start with investments, but instead start with a purpose and a need, building capacity in terms of internal development and business model development is difficult. While the challenges are clearly around financial, human and data resourcing most BAME-led organisations do not have the revenue to feed the initial capacity.
Engaging the BAME Social Enterprise Sector in Social Investment
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Are these challenges BAME-specific? Social entrepreneurs related some of the barriers they face to the systematic and institutional racism which continues to have an impact upon their successes (or lack thereof), particularly around the socio-economic circumstances of their client-base and the problems of securing initial investment to build capacity. While the issue of capacity could be linked to money and class as opposed to race; factors around class, race and access to resources are of course intersectional. Moreover, social and cultural backgrounds can impact on how social entrepreneurs relate to social investment. There are, for example, problems around interest-bearing money for certain faith communities.
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Solutions Participants identified the need to identify their unique approach and therefore more options for support were deemed necessary, particularly in terms of responding to the sectors diversity. Alongside the support identified in the figure below, entrepreneurs listed a variety of areas which they believed would enable better access to social investment: •• •• •• •• •• •• •• •• •• ••
Business development and strategy support A strategic network Interest-free or low-interest financial products A targeted fund which would invest in BAME social entrepreneurs Awareness raising and better information distribution Targeted capacity-building support including, bid writing support for example Sector mapping, skills and service matching Better representation and inclusion within the social investment sector Access to role models and mentoring opportunities Better networking opportunities for BAME social entrepreneurs
One of the main suggestions was around a place-based approach to social investment. Investors tend to be centralised in London and should instead be engaging and with local groups, such as local brokerage organisations and the city council. In addition to training on unconscious bias, there is a role for a facilitator such as BSWN to act as an agent ‘on the ground’. Participants saw a critical need for more BAME people in the investment sector and within infrastructure organisations. When considering the support types required in order to apply for social investment, learning about social investment was given top priority, with pre-bid support, and writing a proposal for an investor ranked slightly below this. Therefore, the issue regarding
Engaging the BAME Social Enterprise Sector in Social Investment
learning seems to be crucial as well as the facilitation of bid writing, which could be addressed by a better engagement between social investors and local intermediaries, such as brokerage, advisory and catalyst organisations in order to support social enterprises building capacity and getting ready for social investment. Additionally, expanding the reach of educational events such as ‘Lets Talk Good Finance’, would introduce people to social investment and thus better tackle its complexity whilst also being an important solution to issues around access and networks. The terms of the application need to be altered in a way which is attractive to social enterprises. Because most of them are smaller organisations, they often do not have the turnover to service an investment of £500,000 for example. Investment is required to establish, not just expand. While social investment may be a tool for development rather than a means to an end, entrepreneurs often stated that the support in terms of investment was required from the offset of their organisation’s growth rather than just at the point at which they are looking to expand and scale up. Better information dispersal is therefore required on the funding options available to enterprises. While a lack of coordination, participation and resources hinders sustainability, social capital – by distributing resources, building capacity, and building consensus – can ensure these obstacles are overcome. A facilitator role to connect them to the right people alongside a strategic network to pool resources is required. With this in mind, while assisting the BAME community in building their own networks to close the deficits in the current social investment system is required, identifying role models within the BAME community to raise their profile and gain prominence is an important step in promoting diversity within the sector. This would require not only a strong strategic network to understand the needs of each individual organisation, the resources available and thus how best disperse those resources, but a targeted fund which would invest in BAME entrepreneurs. This is crucial
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in acknowledging the variations within areas and between communities. Recognition, sustainability and financial stability are important indicators for success, but the value given to independence from outside funding cannot be ignored. Capacity building must, therefore, be more than just investment. While most social enterprises do not start with an investment but a need – growing organically – applying for funding is seen as a debt as opposed to an investment. All entrepreneurs therefore agreed that a facilitator in a role based around coordination could mitigate some of the barriers faced by BAME social enterprises. It is clear that awareness needs to be raised regarding the options for social investment in the BAME community, but equally of the need for brokering between the system and the communities. While training, skills and capacity support are required, an umbrella organisation (with genre specific spaces) which can match enterprises to the relevant places is seen as important.
Assistance with Administration Marketing Business Consultancy Financial Resourcing Human Resourcing Brokering Access to Reliable Data Development of Capabilites
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Engaging the BAME Social Enterprise Sector in Social Investment
Expectations of the Hub and BSWN Reactions were overwhelmingly positive regarding the need for a physical hub as part of a BSWN strategy for the BAME sector. Participants discussed the importance of the space becoming a vessel to access in providing finance, social capital and reliable data. Leadership of the space should however be networked into the spaces of power and opportunity and attention should be drawn to the BAME community for this. In terms of the BAME Hub, as pointed out
by an influential intermediary in Bristol, it should serve primarily the BAME community, but also mix the networks and promote connections across the “power, monetary and intellectual” groups in order to bring change. This suggestion was echoed by some social investors who recognised not only the importance of network building within the BAME community but also the need to “plug them into the system”. All participants saw a role for BSWN in building a bridge between local and national actors. BSWN thus needs to be empowered to drive change, take the recommendations forward and connect with other organisations in the UK.
“Accessibility is not just programmatic or societal. Community business is rooted in local geographic communities and representation is therefore crucial” A contributor from Power to Change
“We are always trying to get on the same page but there is not just one BAME group. We need a space that we can all access to enable better collaboration, but we need multiple spaces to ensure different perspectives are met” A contributor in the focus group with social entrepreneurs