Purple Shoots creates long term, sustainable change for the people we support. Our loans enable our borrowers to create businesses which provide a pathway for them out of debt and the benefits system and the hopelessness of unemployment. The economic and social impacts are huge both for them and for their wider communities. Money given to us can go round and round several times and all our borrowers will say that our belief in them and our small loan transformed their lives.
But fundraising is still a challenge for us – and there are some objections which come up frequently so I thought I would tackle them head on in a series of short blogs. This first one is around sustainability.
“You’re not sustainable”
Behind this accusation is an assumption that if you are a lender charging interest, you must be making money or you’re doing it wrong. There is also another assumption that all things must be sustainable or they aren’t worth supporting. I would challenge both these assumptions.
We do not break even and that is why we are a charity. If we wanted to break even and be sustainable, we could, but it would mean at least doubling our interest rates – we would still not be approaching “Wonga” type interest rates – and in fact would still be considered ethical – but we believe this would be the wrong thing to do firstly because it would be further disadvantaging the people we are lending to and secondly because it would jeopardise their businesses in their early stages.
We run a very lean organization and our highest costs are costs of finance (money we borrow to on-lend) and losses. We do have some business failures – not because our borrowers are crooks or incompetent, but because they are vulnerable to set-backs. If they have been on benefits before they start up (96% have), they will have no savings at all so there is no fall back if something goes wrong – and that is the risk we take. More commonly, borrowers encountering set-backs don’t completely fail but may need to renegotiate repayments because of them so it takes longer for our funds to come back. A commercial lender seeking a break even or profit cannot accommodate this sort of thing – but we do, and it ensures the success of many of the small businesses we start.
We may not be sustainable ourselves but we do create widespread sustainability for the people we support, and local prosperity where businesses are established. Our loans have an economic impact on the local economy of ten times the amount we lend and create on average a £3-£4 net gain to HM Treasury for every £1 loaned. For our borrowers, they have a permanent pathway out of poverty. Whilst many interventions will help an immediate need (food parcels, loans for a washing machine etc) they don’t change or solve the underlying issue. Our loans can, and as a result our borrowers can move out of debt and benefits dependency into an independent income, and permanently and sustainably change their circumstances. They also report to us big improvements in their well-being – improved confidence, reduced anxiety.
The issue of sustainability needs, therefore, to be looked at in the light of that bigger picture. The fact that a small lender like us needs donated funds to make our financial model work must be seen in the light of the huge benefits, economic and social, which our lending creates. The relatively small amounts of money needed to sustain us are massively offset by the benefits to the economy and society we create as well as the gain for the individuals themselves. Anyway – charities by definition are not sustainable businesses (nor is much of what the Government does, the NHS etc), but they are doing good things which makes giving to them worthwhile. In our case, a significant part of the funds given to us have multiple benefits, being loaned and repaid and loaned again many times.
SO PURPLE SHOOTS IS WORTH SUPPORTING! Donations, large and small, help us keep going and growing what we do, creating sustainable change for people overlooked and undervalued by everyone else.
The next blog will look at another objection which relates to the people we support – the assumption that we will lose all our money.