The State's major banks have agreed to contribute €25 million to a new Government "social finance" fund, aimed at supporting the development of community-based projects and facilities.
Social finance is a way of providing low-cost loans to voluntary groups for the development of social and community infrastructure which deliver a financial and social return.
The money may be used to fund projects that have a positive impact on local communities, although they must generate sufficient funds to eventually repay the sums borrowed.
Minister for Finance Brian Cowen announced in the budget that he wished to establish such a fund, which has been under discussion in political and community development circles for a number of years. The initiative forms part of a wider drive to promote greater levels of "social capital", the term coined by Prof Robert Putnam, of Harvard University in the US, to describe the value of social and community ties.
The major banks, which have been in talks with the Department of Finance over the initiative, have agreed to provide €25 million seed capital for the fund.
Many community development organisations struggle to get loans from banks and building societies. In some instances, organisations end up becoming dependent on State grants, which eventually run out, when they might have been capable of succeeding if they had been able to borrow at the outset. However, social finance aims to combat this.
A number of social finance initiatives have been undertaken by the credit union movement. These include a soccer complex in Co Tipperary, a community centre in Co Monaghan and a premises to house the local Youthreach programme for disadvantaged youth in Co Cork.
The final structure of the new fund is likely to be heavily influenced by a report by a number of community and development groups in 2004 titled: In the Common Interest - The Case for Social Finance in Ireland.
A spokesman for Mr Cowen said department officials were in consultation with the Office of the Attorney General and were developing proposals for Government on the legal structures surrounding the fund.
It is likely to feature a central fund, or investment vehicle, while existing agencies may take on the role of social finance providers. The 2004 report suggested said these providers could include organisations such as credit unions, social and ethical banks or recognised community development organisations.
A spokesman for Mr Cowen said a practical model for social finance funding was being developed, based on ongoing discussions between the department and interested parties. "The intention is to keep the administrative structures as light as possible, consistent with meeting the objectives of the initiative, and ensuring that the funds are used effectively," he said.
