A £6.5m scheme to help fund social businesses in Liverpool city region has proved so successful it is now set to be replicated across the UK. Tony McDonough reports

Social economy lender Kindred has already invested £1m into socially-trading organisations (STOs) across Liverpool city region and now its model is set to be rolled out across the UK.

Kindred LCR was set up with £5.5m from the Liverpool City Region Combined Authority and a further £1m from charitable trust Power to Change. It ‘lends’ sums of money to STOs of between £10,000 and £70,000 – but ‘repayments’ do not have to be in the form of cash.

An STO is a commercially trading business that also aims to deliver social benefits for the local community. There are around 1,300 such organisations in the city region generating an estimated £2.9bn a year and employing more than 50,000 people. During her pandemic STOs provided a lifeline in deprived communities.

The loans are interest-free and while the STO can pay some of the funds back into the pot, a percentage of the investment can also be repaid in social repayments, by calculating the social value of each organisation’s work.

Among the recipients of Kindred investment so far are Cycle of Life which looks to encourage more people to take up cycling and foster an “organic cycling culture”; Future Yard, the UK’s first carbon-neutral grassroots music venue; and Café Laziz, a pop-up café in St Helens, building skills and confidence for refugees and asylum seekers.

A report published this week by Lord Victor Adebowale calls for an additional £800m of new money to further support social enterprise growth in the UK. Reclaiming the Future: Reforming Social Investment for the Next Decade advocates for a “radically reformed social investment market that delivers inclusion and equity”.

Lord Adebowale says: “In our view, social investment has lost its focus – supporting the growth of social enterprise… an urgent course correction is needed. Without reform, we will not realise the full potential of social investment.”

In March, Liverpool Mayor Joanne Anderson and City Region Mayor Steve Rotheram invited 20 leaders of the UK’s various social investment funds to talk about the formation of Kindred LCR, a community interest company, as part of The Good Business Festival.

They outlined how it had already invested £1m into more than 20 STOs across Liverpool city region. Now “conversations and consultations” are already happening in Bristol, Newcastle, Manchester, the South Pennines and Yorkshire with a view to setting up similar, regionally responsive and locally-owned funds. 

Mayor Anderson said: “My working life has been spent encouraging businesses to make social value-informed decision making at their heart. It is the reason I included a triple-lock in my manifesto, to ensure people, planet and equality are central to everything we do.

“Having businesses with a social purpose makes a difference and creates opportunities for the most disadvantaged, improving people’s lives.

“Working with partners, we have a huge opportunity here to radically reform the social investment market and build the infrastructure that will allow social enterprise to play its part in delivering a more inclusive and equitable economy across the UK.”

Set up in 2020, Kindred was designed by more than 150 STOs from across Liverpool city region and is owned and led by them – a fast-growing community of STOs already numbering 600 since its launch.

Kindred’s sole purpose is to grow the social impact of those it invests in – not turnover or profit, jobs or GVA. The gathered social investors advocated their investment be led by the outcomes and impact – investing incrementally in what works as opposed to holding competitions for the best written bid or most promising spreadsheet. 

Kindred also encourages those who receive investment to collaborate with each other, rather than compete, as its wider aim is to create a fairer local economy. Cycle of Life founder Ibe Hayter, said: “The innovative, social impact-focused terms of the loan will enable us to reach new markets and provide long term sustainability.”

Metro Mayor Steve Rotheram added: “The Liverpool City Region has always been a trailblazer, home to countless breakthroughs and firsts that have changed the world we live in. Despite the turbulence and disruption of the last few years, we’re continuing to lead the way as a force for good.

“The pandemic gave us an opportunity to press the reset button and reimagine a better future for our region – one that is equal, fair, and where no one is left behind. It’s these values that underpin what Kindred it all about.

“The project is just one of the many ways that our region is leading the way to promote better business practices – we’re redefining what ‘good’ business really means in the 21^st century. It’s no surprise that the rest of the UK wants to join our movement – as I always like to say, where the Liverpool City Region leads, the rest of the country follows.”