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The overdue rehabilitation of camels

30 January 2015

Social capital means you can have your cake and eat it, writes Jonathan Romain

ONE of the dirtiest words in the English language today is "bankers". They have been transformed from the respectable image of Dad's Army's Captain Mainwaring to the grasping portrayal of Wall Street's Gordon Gekko.

The prophets of the Hebrew Bible lambasted the wealthy for trampling over the rights of the poor; and yet we also know that, without the wealthy spending lavishly on goods or employees, people who are lower down the economic scale would be denuded of income.

The New Testament twice records that it is easier for a camel to pass through the eye of a needle than for a rich man to enter the Kingdom of God; and yet, without generous benefactors, many a church (or synagogue, or mosque) would never have been built.

A way of bridging the divide between God and mammon seems to be emerging in the concept of "social investment". It is for those who wish to use their wealth for the common good; but it does not involve the financial martyrdom of sacrificing capital, or doing without a rate of return. Rather, it involves investing in noble causes that might not otherwise attract funding and that, if successful, will have a positive impact. Thus the investor can combine both social benefit and economic gain.

One option is to put money into institutions such as the Charity Bank, which was established in 2002 specifically to lend to charities, but also to achieve interest for investors - rather than pursue the usual business model of helping commercial companies on a risk-and-return basis.

It concentrates on areas that traditional banks may shun because they involve a leap of faith - such as purchasing a long-sought-after property, rarely on the market, that is just what a charity needs. Alternatively, it might help to provide match funding, to enable a grant to be released before it expires. Thus the Greek Orthodox Community of Milton Keynes was loaned £125,000 to help buy a hall, next door to its church, to enable it to expand its activities. When St Laurence's, Bapchild, in Kent (renowned for its medieval wall-paintings) suddenly found that it needed rewiring, it borrowed £5000 from the Charity Bank to meet the shortfall.

These may be small amounts compared with daily transactions in the City of London, but, for the groups concerned, they can make the difference between progression or stagnation; fulfilling their mission, or failing to survive. For their part, investors can have the satisfaction of knowing that their spare cash is being used to "make a difference" - in reality, and not just as a soundbite.

BESDIDES helping religious communities, the Charity Bank also aids arts initiatives, social- care projects, sporting opportunities, and housing groups. The common theme is that these are organisations whose primary aim is to do good rather than maximise profit. The Government has realised the value of this cultural shift in attitude and, although the "Big Society" is little talked about in public nowadays, it gives active support to these and other schemes that might once have fallen under that umbrella.

The Seed Enterprise Investment Scheme, for instance, provides up-front income-tax relief of up to £50,000 on investments in small social-enterprise companies that are less than three years old. Not only is it a chance to nurture a social impact company into existence but, if the venture succeeds, the investor is exempt from capital gains tax on any profits.

A well-known example of a private company with a strong social-enterprise character is The Big Issue, which gives earning opportunities to those who might not be able to gain employment. It is often referred to as "the paper that is the most bought and least read", because many purchasers are not interested in its contents, but approve of its ethos and want to support it.

There will still be individuals or businesses who simply wish to donate money to good causes. Without such generosity, most charities would collapse overnight. The availability of social investment now offers an alternative approach, however. Many reinvest their profits straight back into the social causes they care about, recycling their money and creating a continuous stream of financial support. It also caters for those who are not "wealthy", but may have funds they do not need in the immediate future. These can now be used, for a specified period, in a fiscal way that corresponds to religious values.

Camels may no longer represent the disadvantage they once did.

Rabbi Dr Jonathan Romain is minister of Maidenhead Synagogue and editor of Really Useful Prayers, published by the Movement for Reform Judaism.

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