ONN’s goal is to catalyze improvements in the Ontario nonprofit sector’s funding environment by advocating for an enabling policy environment that allows nonprofits to diversify its revenue sources, and seize expansion opportunities with their economic development activities.
The nonprofit sector is a vital part of Ontario’s economy. Nonprofits provide a wide range of goods and services, such as social services, long term care, childcare, and affordable housing. Many nonprofits, such as nonprofit social enterprises and co-operatives, also operate revenue generating activities while embedding a social, cultural or environmental purpose into the business, reinvesting the majority or all of the revenues back into their social mission.
- caterers and couriers
- repair shops
- landscape and waste management services
- daycare and housing co-ops
Since nonprofits are people not profit driven, they engage in local economic development in ways that prioritize community well-being, and positively impact local communities.
What is social finance?
Social finance is the practice of lending/ investing to create social and environmental impact in addition to financial returns.
Examples of social finance include:
- Community bonds: many people loan small amounts to one project.
- Loans: investors get their money back plus interest, aka debt. In order for the loan to be accessible for nonprofits, it needs to be low-interest and patient.
- Equity investments: investors own part of the organization – earn their money on dividends or when they sell their share.
- Guarantees: Investors acting as a guarantor (co-signing a loan agreement) to allow a non-profit to secure a mortgage to finance a building for an affordable housing project.
Example: Developing and Nurturing Independence (DANI) is a nonprofit organization that supports people with disabilities. DANI also runs a social enterprise called DANI cafe which creates paid employment opportunities for adults with disabilities. Revenues generated from the cafe are reinvested back into the nonprofit to run programs for people living with disabilities, and their caregivers.
Why nonprofits should consider social finance
Social finance can help organizations like DANI access new capital to grow their social enterprises. It can help “grow the pie” of nonprofits’ funding/revenue by providing new pools of money for nonprofits on top of existing government grants, foundation grants, and donations, which is particularly crucial in the current economic climate.
Nonprofits can harness this financial opportunity to:
- Diversify income streams;
- Create income streams independ of grants and donations;
- Grow existing programs and economic development activities;
- Create new opportunities and innovate.
Example: A nonprofit organization wants to build a kitchen to start a revenue generating catering program that trains and employs people facing employment barriers. However, to get started, the organization needs money to purchase equipment to set up the kitchen. In this case, the nonprofit may consider using social finance to secure initial investment (a loan) to build the kitchen. Once the kitchen is ready and the revenue generating catering program starts running, the organization can pay back the loan. The revenue generated through the food program can also be used to support the general operating of the organization, or other mission related activities/programs.
Wondering what social finance looks like in action? Check out the case studies below to learn how these nonprofits utilized social finance to advance their missions:
Federal Social Finance Fund
The Social Finance Fund is a $755 million investment from the Government of Canada to advance the growth of the social finance market in Canada.
By increasing access to flexible financing opportunities in the social finance market, the Social Finance Fund will help social purpose organizations (SPOs) grow, innovate, and enhance their social, economic, and environmental impacts.
How does the social finance fund work?
The fund flows from the three social finance fund Managers (Boann Social Impact, Fonds de finance social – CAP Finance, Realize Capital Partners) to social finance intermediaries (such as foundations, credit unions etc.), then through to social purpose organizations whose social impacts benefit communities across Canada.
- It’s not a grant: Demystifying the Social Finance Fund – Q&A
- What is social impact investing?
- More than Money: How social finance can build resilience in the arts sector explores how the non-profit arts sector in Canada could harness the power of social finance to strengthen its financial footing.
- Tapestry Community Capital provides services and resources around Community Bonds – Case Study: Sketch Art’s Community Bond.
- Subscribe to Social Innovation Canada’s newsletter for regular updates on social finance news: https://sicanada.org/newsletter/.
- The Boston Impact Initiative (BII) is a nonprofit impact investing fund focused on economic and racial justice. It serve as an example of a fund designed by communities and invests in social enterprises within these communities.
- Investment Readiness Tool by S4ES (Social Enterprise Ecosystem Project) is a self-assessment tool created by a collaborative group during the first Investment Readiness Program.
Some social finance programs to check out:
- Verge Capital: supports local economies and communities across Southwestern Ontario by investing in social enterprises that put people and the planet first.
- 10C Harvest Impact Fund: a new community finance intermediary that provides social finance loans between $2,500 to $50,000 to organizations/projects/individuals in Southern Ontario.
- The Social Enterprise Fund: invests in Alberta’s social enterprises by providing repayable loans.
- Bloom Local Food Fund: a place-based social impact fund designed to build sustainable and inclusive rural communities
- The Fair Finance Fund: supports food and farming local enterprises and co-operatives in Ontario with loans and mentoring/business support services.
- Community Forward Fund: provides loans to nonprofits, charities and non-profit social enterprises across Canada.
- Canadian Co-operative Investment Fund: invests in the co-operative sector in the form of loans, equity and quasi equity investments. They primarily focus on supporting the growth of existing co-ops.
- The Social Impact Fund by London Community Foundation: offers flexible and low-interest loans to charities, nonprofits and social enterprises.
- The Table of Impact Investment Practitioners (TIIP): This community of practice for social finance intermediaries has a list of members and published Impatient Readiness: The State of Social Finance in Canada 202, which includes a good assessment of intermediaries across the country.