Working with social enterprise ACH, social impact investment company Resonance has developed an innovative, ethical and Sharia compliant financing model for purchasing properties to house refugees. With few or no possessions, these people have been forced to flee their countries, such as Syria, arriving in the UK in desperate need.

Each year ACH receives over 700 people exiting UK asylum centres with refugee status who would otherwise find themselves homeless.  ACH’s housing is mostly leased from private landlords but difficulties can arise as owners raise rents or sell for capital gain.  So ACH decided to gain more control and approached Resonance to see if they could arrange investment for them to rebalance by purchasing freehold houses.  With experience in raising capital for the Real Lettings Property Fund, the Resonance team felt able to tackle two further challenges: the finance raise being social investment rather than from the high street, and it being within a ‘non-interest bearing’, Sharia compliant model.

The solution developed by Resonance and ACH is a first in the UK:  Yield Sharing Finance, where the risk/reward is shared by the lender and the investee, in this case ACH.  Jari Moate, Investment Manager at Resonance, was instrumental in forging the model and explains how it works: “Under standard loan financing, social impact driven or not, the lender is set to receive a certain level of interest per annum based on the amount invested e.g. borrow £100K at 5% and receive £5K interest – this is due whether the underlying asset performs well or not.  With the Yield Sharing model, the investors’ returns are tied to performance.  The net yield from the property i.e. net income from the rents, is shared between the investors who lend the capital and ACH who support the tenants and maintain the properties.  Payments to investors are based on an expectation of what the yield will be, which is paid and re-confirmed annually.”

Richard Thickpenny, ACH’s Business Development Manager said of the model:  “We have transformed a faith-based financial agreement into a 21st century FCA compliant, ethical legal agreement suitable for social investors from all backgrounds – of all faiths or none. This new investment model has allowed us to purchase our first freehold properties in Birmingham.

“It creates a new balance, wherein the power between an investor and investee becomes co-operative instead of potentially exploitative.  The investors benefit as their investment is directly tied to the success of the investee’s mission, yielding a finance return on a fair and equal basis.”