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Social Enterprise 5

ASTON REINVESTMENT TRUST

15-03-2008

How do entrepreneurs in deprived areas persuade banks to lend them money for unproven businesses? The truth is, they struggle. But as Steve Walker, ART’s chief executive explains, that’s where his organization comes in.

ART (Aston Reinvestment Trust) was one of the first locally targeted Community Development Finance Institutions (CDFIs) in the UK. It was set up in 1997 with the aim of alleviating poverty by supporting enterprise – both social and commercial - in disadvantaged areas of Birmingham.

Constituted like an old-fashioned building society, ART raises money from both private sector ‘social investors’ as well as the public sector. It lends to viable enterprises that have been unable to get the finance they need from a bank and all money repaid is reinvested in more loans.

ART was established because in 1989 the Aston Commission, chaired by Sir Adrian Cadbury, reported on the difficulty that local people were having in accessing finance. As bank branches were closing, the proposed solution - after extensive research and consultation - was to set up a new kind of local financial institution.

Drawing partly on experience in the United States, and using a model established by ICOF (Industrial Common Ownership Finance) nationally and Shared Interest to support microfinance internationally, ART was designed to encourage enterprise and support local jobs for local people.

When it opened its doors for business, ART had obtained a £40,000 grant from a charitable trust and then raised over £300,000 in investment from private individuals and companies - all of whom were looking for a social rather than financial return.

The initial private investment, including support from all the major banks, allowed ART to secure public sector funding first through Area Regeneration Initiatives, then the European Union, the DTI (Phoenix Fund) and now Advantage West Midlands (AWM). This in turn has enabled ART to raise further private sector finance, including bank loans.

As it celebrated its 10th Anniversary in June 2007, ART had lent nearly £6m and helped over 320 borrowers to develop their enterprises and create or safeguard over 2,800 jobs in the Birmingham area. £1m of this was in pioneer lending to social enterprises. ART’s 10th Annual Report, published in September 2007, showed that it had a strong balance sheet, with over £1m in reserves and shareholders (who are now eligible for Community Investment Tax Relief) with investments totaling £450,000.

The range of enterprises ART has supported has been wide and reflects the substantial changes in the local economy over the past 10 years. They run from long-established engineering companies to new-start new media companies, from food manufacturers and restaurateurs to providers of sports and leisure facilities. Some enterprises have succeeded; some have failed, but that is part of ART’s mission in providing an opportunity where others cannot.

The ART model has now been replicated up and down the UK, its Chief Executive has informed policy decisions at a national, regional and local level and visits have been hosted from groups on fact-finding missions from around the world.

ART clearly has a vital role to play in filling a gap in access to finance for enterprise in the Birmingham area, enabling much to happen that otherwise would not. And, with £1m a year to lend over the next two years, is looking forward to building on this success.