• Opinion
  • January 29, 2019
  • 7 minutes
  • 1

How loan funding can boost innovation when time and resources are scarce

Opinion: We're helping public services organisations to overcome barriers to innovation

loan funding

This piece was written by AliceTurner, Engagement & Communications Manager at Y Lab. For more like this, see our government innovation newsfeed.


Y Lab is the public services innovation lab for Wales, a partnership between Nesta and Cardiff University. In 2017, we launched Innovate to Save, a funding and support program that aimed to respond to a growing need to support public services organisations to innovate, and in doing so improve services and generate cashable savings. We’ve now launched a guide to Repayable Finance for Innovation in Public Services to share what we’ve learned.

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Since 2009, the Welsh Government has been providing interest-free, patient loans to organisations that want to transform their service delivery to save money. To date, it has given £174million (US$230m) to 181 projects.

The scheme is undoubtedly successful; there’s a very low attrition rate on those loans. But they weren’t attracting innovative projects — what was coming through lacked the novel ideas that had the potential for long-lasting impact and the kind of radical innovation that is required to respond to increasing demand on public services.

We know that Wales isn’t the only place where public services innovation encounters barriers. Eddie Copeland, Nesta’s Director of Government Innovation, frames the problem this way: “Even where resources for experimentation are available, some [organisations] find it hard to justify the use of taxpayer money on unproven ideas. If public sector leaders have to choose between delivering a core service on which many citizens depend, or funding an experimental new approach, many will feel they have no choice but to focus on the former.”

We wanted to help change that. Working with the Welsh Government, Wales Council for Voluntary Action and bringing in expertise from our partnership, we designed a three-phase program that would offer projects time and space to experiment, off-set some of the financial risk through grant funding and then give organisations the opportunity to apply to a loan fund that would offer repayable finance on an interest-free, tailored repayment plan, enabling them to scale their idea and realise the cashable savings they’ve identified.

We’re motivated by helping public servants to think big, test their ideas and gather evidence

In Spring 2017, Y Lab travelled across Wales and hosted a number of briefing sessions and workshops to engage potential projects with Innovate to Save, to find out what kind of ideas were out there and to help develop skills and capacity for innovation in teams. Suitable projects then submitted an application and went through an interview process; we were particularly interested in the team’s attitude and the project’s potential for scale.

We anticipated that by introducing a small amount of grant funding — of up to £15,000 (US$20,000) in the first round — and tailored non-financial support, the program would appeal to do-ers; funding would make it more palatable and the support would bridge any gaps in the teams’ skills or knowledge.

We took eight projects through the first Research and Development phase. It was exciting working with projects that were addressing important challenges like accommodation for young care leavers, communities affected by climate change and delivering flexible care to adults with disabilities.

Innovate Trust
Innovate Trust tested the use of Amazon Alexas and Google Home devices in accommodation for adults with learning disabilities. They offered training and peer support to their tenants for using the devices, and they experimented collaboratively with different ways to increase their independence and wellbeing. One tenant used their device to wake up without support from a support worker; one was able to access sensory experiences with synchronised light settings.

FABRIC
FABRIC designed and tested a “step-down” Community Accommodation program for young care leavers. Starting at age 17, young people preparing to leave full-time care were offered a place in a house, alongside support and coaching in independent living skills, such as paying bills and Council Tax. After completing a foundation phase, Assured Shorthold Tenancies were offered to those who were 18 and could begin to live independently, creating savings for the Local Authority on “nightly charges” if the young person was to stay in residential care.

Not all the projects were able to generate savings; some of the support we offered didn’t work well; some of the data we had assumed would be available wasn’t. But of the eight projects, four applied for a loan. Those applications requested an average of £37.50 in repayable finance for every £1 of grant funding given. So far, we’ve awarded £1.4million (US$1.8m) to two organisations.

As we begin work on the second version of Innovate to Save with seven new projects, we are proud to look back on some of what has been achieved and we want to show others what we’ve learned. You can download our Repayable Finance for Innovation in Public Services, which we hope will help others to develop programs of their own.

We’d love to know what you think and if you have tried something similar. What might work for your organisation? We’re motivated by helping public servants feel empowered and supported to think big, test their ideas and gather evidence that supports what they find out. — Alice Turner

(Picture credit: Alex Sedgmond)

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