Second-hand clothes shops old hat as Scope turns to City-style fundraising

Scope is launching a new investment platform, which it claims will generate a return of 18,000 for every 1,750 donated through a combination of donations, tax breaks and loans.

It is thought to be the first time a charity has used a leveraged fundraising product.

The group is hoping to raise 1.8m during the pilot phase of the scheme to build 15 new flats for disabled adults in Essex with complex needs to ensure that they do not spend the rest of their lives in nursing homes.

Dubbed the Grangewood Venture Philanthropy Project, the scheme, which will target high net worth individuals, has been developed with the advice of people who are familiar with the world of private equity.

Under the scheme individuals are asked to donate 2,800, which is made up to 3,500 once Gift Aid is included.

At the same time they are asked to lend the charity 7,000 over three years, giving a total initial commitment of 9,800, which is worth 10,500 to Scope once Gift Aid is factored in.

The investors are able to claim higher rate relief back on this sum of 1,050, and the 7,000 loan will be repaid after three years, meaning the net cost to the investor will be the initial 1,750.

Scope is then able to match fund every 10,500 investment with a commercial loan of 7,500.

As a result, each investor who donates 1,750 and lends 7,000 for

three years generates an investment of 18,000.

Although the business model does not offer a financial return to investors, it does provide a guarantee that 80 per cent of money will be repaid.

The charity needs to sell 100 units to generate its target of 1.8m.

Scope said the concept could be extended to leverage its existing asset base of properties worth 18m, which could finance more than 40m

worth of developments for its services.

Karren Brady, vice-chairman of West Ham United, said: "What's unique about Scope's venture philanthropy model is that it allows business people to invest in a great cause in a much more efficient way.

"As the majority of the capital is re-paid after three years people can make their donations work even harder by re-investing in other causes or social businesses."

nCharities are facing a 57m drop in the amount of money they are left in wills each year.

The sector is facing a "double whammy" of losing legacy income at time when it could also see statutory funding cut, according to the ESRC Centre for Charitable Giving and Philanthropy (CGAP) at Cass Business School and charity consortium Remember A Charity.