News Column


June 1, 2014

By Sarah Bridge, Financial Mail on Sunday, London

June 01--PRIVATE investors will be able to lend money directly to charities through a bond market being set up by the London Stock Exchange.

The new market will allow savers to buy bonds issued by leading charities and receive an income for their loan while investing in a worthy cause.

The scheme, which has the backing of the Government, will be the first time charities have been able to issue bonds directly to ordinary investors.

About 100 UK charities are expected to raise between pounds sterling 5 million and pounds sterling 10?million each.

Bonds will be issued through a new vehicle called Retail Charity Bonds. They will be listed on the Stock Exchange's retail bond market so savers will not be locked in until a bond matures but will be able to trade them like shares. They will be eligible for Isas and self-invested personal pensions (Sipps).

The first bond is expected to be launched later this month, with Age UK, Mencap and Centrepoint, the charity for homeless young people, among those likely to raise money through the market.

Before the financial crisis, such charities were able to borrow cheaply from the banks.

Now borrowing rates have more than doubled and loans have been reduced from around 25 years to nearer five. Retail Charity Bonds chairman John Tattersall said: 'It is very difficult for charities to access bank finance and people are increasingly keen to invest their money in socially responsible ways. We can plug that gap in the market.'

The Retail Charity Bonds platform will allow charities to borrow money for seven to ten years, with bond buyers receiving annual interest rates of about 3 to 5 per cent. To keep costs down, lawyers, and banks have given their time for free, saving charities some pounds sterling 2?million in advisory fees. The bonds will only be issued by charities that own significant assets, such as care homes, supportive housing and specialist health units.

The market will also be overseen by an independent board, including a former director of the European Investment Bank and three former partners of PwC.


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Source: Daily Mail (London, England)

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