Research summary: Closing the capital access gap for equity- deserving groups

Alternate formats

Why this study

The Government of Canada began the Investment Readiness Program (IRP) in the spring of 2019. After the launch, we wanted to understand how we can close the access to capital gap for social purpose organizations (SPOs) led by equity-deserving groups such as:

• Indigenous
• Black, and people of colour
• women
• 2SLGBTQI+
• newcomers, and
• persons with disabilities etc

The main goals of this project were to:

• analyze and recognize conditions and barriers in accessing capital to better inform future actions, and
• invest in disaggregated data collection to understand the many factors that have led to unequal access to capital

What we did

This study used five strategies:

1. scientific resources gathered and classified according to themes (gender diversity and Canadian focused)
2. a questionnaire to collect data and insights
3. interviews with stakeholders holding various perspectives within the social finance ecosystem
4. analyzing demographic data of recipients for the IRP, and
5. knowledge and experience from the SVX and New Power Labs teams to complement the data. This provided insight about SPOs and social impact financing.

What we found

The study found a broken system for equity-deserving groups. It also identified many blind spots in the social finance sector. From applying for funding to securing the right types of capital, these groups often lack access to the resources they need to succeed. This is because they are considered "high-risk".

Colonized views and models, and unconscious biases against equity-deserving groups, cause a power imbalance in the flow of capital. This imbalance is due to:

• infrastructural barriers faced by rural and Indigenous communities
• gaps in capacity-building support
• language barriers
• political barriers
• wealth and socio-economic status, and
• limited role models

In addition to the above, equity-deserving groups do not have the same level of access to existing professional networks. These networks have developed through the colonial system that has excluded equity-deserving groups. They focus on specific personality types.

What it means

This research helped develop recommendations to reduce the barriers equity-deserving groups face. It also ensured that impact investing reduces inequality through:

• intentional design structures, and
• incentives

We learned that change is required from existing capital holders and impact investment funds. As well as support from both entrepreneurs and investors. This will facilitate equitable access to social finance capital.

The research recommends investing in new programs and intermediaries and changes to existing structures. To be more specific, we need to:

• invest in storytelling (sharing stories of role models within equity-deserving groups)
• increase capacity supports for equity-deserving groups
• invest in networks and navigation to support equity-deserving groups
• enable greater diversity in capital deployers
• develop a robust data strategy
• increase flows of capital into social impact
• remove barriers for low-income founders, and
• remove barriers for retail investors

Contact us

Income Security and Social Development Branch, Social Innovation and Community Development Directorate, Policy Division

Email: esdc.nc.sspb.research-recherche.dgpss.cn.edsc@hrsdc-rhdcc.gc.ca