The bank will provide funds in the region of £60–100 million for projects with the monies coming from dormant accounts. The Co-operative Bank will establish the back-office central reclaim fund, which will be set up by the end of the year and receive transfers from banks and building societies.
Funds will then be distributed to communities through a series of intermediaries to be established by April 2011. Civil Society Minister Nick Hurd said: “The intention is for the bank to be as independent and unbureaucratic as possible. It will be a wholesaler, not a retailer, so it will support intermediaries that are growing the market for social investment.
“If it invests in social enterprises . . . it will do so through intermediaries that have structured financial products, such as social impact or community bonds that connect private capital with the opportunity for good, and for social impact.
“I have had a series of discussions with several intermediaries in the marketplace that are in the business of trying to encourage and support social investment. The intention is for the bank to stand behind and support those intermediaries to allow them to do more.”
The Association of British Credit Unions has said credit unions will be ideally placed to distribute funds to communities. Said Chief Executive Mark Lyonette: “When the law changes in the next few months, credit unions in Britain will be able to provide services to community groups and social enterprises, as well as individuals, for the first time.
“As financial co-operatives, grounded in their communities, credit unions will be ideally placed to help local people work together to improve their lives by becoming intermediaries for the Big Society Bank. We look forward to working with the Government to achieve this.”
Ian Rothwell, Development Manager of Co-operative & Community Finance (C&CF) — one of the many organisations that provides social financing, told the News: “I’m waiting with interest to see more details about the proposed Big Society Bank, but I am sure that community organisations, co-operatives and social enterprises will continue to need advice and finance from people who understand ethical values as well as profit margins. C&CF will continue to provide that specialist support as it has done for nearly 40 years.
“David Cameron referred to community-run pubs and post offices. C&CF has an excellent record of financing community-owned shops and we would be keen to support a significant increase in the co-operative ownership of all kinds of community facilities.”
Charles Middleton, Managing Director at Triodos Bank, which provides banking services for the third sector, said: “By forcing high street banks to free up long-dormant deposits and kick-start lending to the social enterprise sector, the future lifeblood of the UK economy, the Big Society can now start to be realised.
“However, the detail is still lacking, and plans are not quite as simple as they appear. Talk that the bank may have to launch with reserves of just £60m, due to high street banks’ reluctance to turn on the tap, as well as difficulties in accessing dormant accounts, highlights just some of the difficulties the coalition government may encounter in rolling-out finance to the social and charity sectors.”
Added Mr Middleton: “While we are supportive of anything that rolls out additional funding to the social sector, we believe the Big Society Bank can only succeed if it works as a wholesaler, dispersing funds through existing intermediaries with proven and lasting experience in financing this sector.
“Although how this will be reconciled with the overall Big Society sway towards grass-roots, citizen empowerment remains to be seen. The government needs to look closely at the lessons learned through previous interventions and be prepared to be flexible in its operational delivery of these proposals.”