Social finance is a method of leveraging private to capital to make a social impact as well as a financial return. A Social Enterprise is an business or organisation whose objective is to achieve a social, societal or environmental impact, rather than maximising profit for its owners or shareholders.

Social finance has emerged as a significant public policy priority in many European Union member states as they seek to support collectively-owned social enterprises addressing societal challenges. It is widely accepted that success in these cases “depends on the existence of a solid social finance ecosystem” (European Investment Bank 2020). This ecosystem is understood to comprise policymakers from municipal, regional and national levels, as well as social enterprises, social enterprise representative bodies, higher education institutions, social lending organisations and intermediaries.

Up to now, there has been no single accepted definition of social enterprise in an Irish context and this has created an inherent difficulty in measuring the prevalence and impact of social enterprises. In order to direct appropriate supports to where they are needed, and to develop metrics around the extent and impact of social enterprise, it is important to define what we mean when we refer to social enterprises in an Irish context. This DCU research project sought to address this lack of definition and policy gap.

Arising from the work of the research project and subsequent consultations, the following definition at the start of this article is used in this policy to describe social enterprises in an Irish context. In addition, these enterprises pursues their objectives by trading on an ongoing basis through the provision of goods and/or services, and by reinvesting surpluses into achieving social objectives. It is governed in a fully accountable and transparent manner and is independent of the public sector. If dissolved, it should transfer its assets to another organisation with a similar mission.

In recent years a significant number of EU member states have been engaged in social finance pilot projects as proofs of concept. Ireland has been a laggard in this regard and successive governments have failed to provide and appropriate framework for social enterprises. That only changed in 2019 with the launch of the first National Social Enterprise Policy 2019-2022.

The policy explicitly named access to appropriate financial instruments as a key challenge for Irish social enterprises as there is no tailored financial instrument or specific statutory budget that fits the needs of the growing social enterprise market. Moreover, there is a recognised lack of investment readiness among social enterprises.

The research and analysis process in developing the policy involved several distinct elements: The team’s initial task was to conduct a systematic literature review. This process involved engaging closely with project's thirteen European partners to calibrate initial findings on a quarterly basis. The team also delivered regular briefings to the relevant policy unit in the Department of Rural and Community Development.

The project included a substantial user-led/participatory research component, including a preliminary research workshop with the Irish Local Development Network; a survey distributed nationally; and four participatory research workshops where the recommendations were "field tested" by social enterprises. Later in the project there was a dissemination roadshow with five events  (Dublin, Cork, Donegal, Galway and online) where the key findings were outlined.

The proposed financial instrument was also detailed at the Department's National Social Enterprise Conference in November 2022 prior to the formal launch and research dissemination event which took place at the Central Bank of Ireland. A launch and research dissemination event on the Central Bank of Ireland which detailed the key elements of the Hybrid Social Finance Loan.

Building on the DCU research team's findings, the project partners, Rethink Ireland, Community Finance Ireland and Dublin City University, developed a blended social finance model (Hybrid Social Finance Loan) which includes the following elements:

• Non-repayable loan, which will be tied to agreed performance milestones;
• Non-financial supports, tailored to the needs of the organisation, to improve its investment readiness, develop its capacities and create social impact;
• Accelerator programme providing training in four core areas: impact management; communications; sustainability and strategy; and equality, diversity and inclusion;
• Continuous support focusing on building capacity and resilience in the first two years.

The Department of Rural and Community Development received the project's final report for review in early 2023 and in May 2023 established the Hybrid Social Finance Loan scheme. The first tranche of funding was drawn down over the following months and a  second tranche of funding was drawn down in October 2023. A potential third tranche of funding is currently under review.

The outcome of the project was the development of this innovative financial instrument which has the provision of critical business support to social enterprises as a core element. The project brought this about through positive collaboration between a social lending organisation, Community Finance Ireland, and a government department. This represents a pronounced, if initial, policy shift from a grant dependent model of development to a trading model of development.