The financing problems of social enterprise in Canada are well-known. Banks have difficulty extending commercial loans to social enterprises because they lack the security of hard assets, and private investors can't take ownership positions in businesses that -- as non-profits -- have no owners.

Yet there are fledgling models in Canada that have overcome these barriers. The Candian Alternative Investment Cooperative (CAIC), Access Toronto, Jubilee Fund in Winnipeg, and community loan funds in Montreal and Ottawa are some of the innovations that have successfully brought together socially responsible investors with local volunteers and publicly-funded agencies. The result is jobs and economic opportunity for low-income people in these communities.

The challenge now is to scale up. Is there a way to create an investment product that would attract not just thousands of dollars, but tens of millions of dollars to the social enterprise sector? As communities across Canada struggle with the effects of the current recession compounded by years of economic and social neglect, the need for such an investment vehicle has never been greater.

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One of the signs that there’s more activity around social finance in the last few months is that there are more jobs available in this line of work.

Three great organizations – the MasterCard Foundation, the Community Power Fund, and the Centre for Sustainability and Social Innovation at UBC – are all hiring for a number of exciting positions.

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There have recently been significant inroads made in creating new sources of financing for non-profits and social ventures in Canada. Causeway, a program of Social Innovation Generation (SiG) and an organization incubated at MaRS in Toronto committed to catalyzing the social finance marketplace, hosted two discussions over the past month to flesh out the development of potential investment vehicles.

In this discussion I will provide context for these conversations and offer resources for further understanding. I will continue to use this blog platform to chronicle the main developments of these funds in an attempt to keep you and the mounting number of social financiers up-to-date.

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According to CCINC, a conservative demand by community investment organizations surveyed in the study is $750 million over two years. Growth opportunities that were identified included; business succession; social enterprise, including buyouts and conversion to co-operatives; housing development; and community owned energy. Early results from a financing demand study in Atlantic Canada by the Social Economy Research Network suggest the average social enterprise requires a minimum of $500,000 for expansion of programs and services including investing in housing.

Some of the common barriers faced by community investment organizations to finance projects include; lack of operational resources to enable deal flows; the need for training and capacity by project proponents; and rising costs of construction making it tougher and tougher to build affordable housing.

It is clear that community investment is growing in Canada and that there is continued demand for financing. How will we ensure its growth?

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There are five priority neighbourhoods in Saint John, NB where the poverty rates are 30% to 50% and the home ownership rates are less than 2%. A consortium of non-profit organizations called ONE Home decided to address the issue by piloting a home ownership project consisting of three semi-detached units. The Saint John Community Loan Fund extended a three year loan of $35,000 to the $400,000 project which leveraged a conventional mortgage from the local credit union. The housing is built and future home owners are moving in.

We have all heard such phrases as “giving credit where credit is due” and “banking the unbankable.” Community investment works in that space. The Canadian Community Investment Network Co-operative defines community investment as “financing and technical assistance that targets the underserved; including individuals, communities and community (or social) enterprises.” In reality, the line between community investment, social finance and impact investing is blurry. All describe financing whose intention is to develop opportunities and improve conditions for individuals and their communities. It might be focused on income generation, community renewal, affordable housing, or environmental sustainability.

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