Affordable housing in Shetland, Borders and Fife has received a boost of £16 million this month thanks to Scottish Government investment in charitable bonds.

Issued by social investment charity Allia as part of the government’s More Homes Scotland approach, the bonds provide loans to housing associations and allows the interest to be made immediately available as charitable donations.

Allia has made available £5m each to Eildon Housing Association and Kingdom Housing Association, with another £1.3m to Hjaltland Housing Association to build homes in Borders, Fife and Shetland respectively. The interest on these loans totalling £4.7m will be used by the Scottish Government’s Affordable Housing Supply Programme for the construction of new social housing.

Housing minister Kevin Stewart made the announcement during his visit to Kincardine, where new affordable homes are being built thanks to a development loan under last year’s charitable bonds programme.

He said: “I’m sure this will be very welcome news for people in Shetland, Fife and the Borders. It means that we have now invested a total of £70m in nine charitable bonds, providing an innovative source of finance for housing associations to support the development of 935 homes for social and mid-market rent.

“We have committed to deliver 50,000 new affordable homes during the term of this parliament and this is yet another important step towards this target.”

Bill Banks, chief executive of Kingdom Housing Association, which is responsible for the Kincardine development, said: “Kingdom Housing Association is very pleased to again be working with Allia Impact Finance in terms of raising private finance for much needed new development of affordable housing in Fife. The key attraction for Kingdom Housing Association of the Allia Scottish Government bond is its simplicity in what is an ever more complex area of raising private finance. The new loan of £5m provided by Allia will enable Kingdom to acquire, through off the shelf acquisition and new developments, a total of 98 new homes. We are also very grateful to Scottish Government for providing grant funding which is being used on these developments.”

Nile Estephan, chief executive of Eildon Housing Association, said: “We are delighted to help the Scottish Government meet its ambitious housing targets by planning record-breaking growth of new affordable housing in the Scottish Borders. The additional £5m we have secured through the Allia charitable bonds route is in addition to the £10m we secured through the same route last year.

“This flexible and affordable source of finance will assist us in delivering high quality new affordable homes in a range of towns and villages across the Scottish Borders, including in Selkirk, Galashiels, Jedburgh, Newtown St Boswells and Earlston”.

Susan Gray, head of finance and corporate services at Hjaltland Housing Association, added: “Hjaltland Housing Association is very pleased to have secured £1.325m of loan finance from the Scottish Government-funded Allia bond programme. This ensures that our on-going development programme can continue to increase the supply of much needed affordable homes for families in Shetland.

“This particular new funding stream will assist in the development of additional rented properties in Tingwall, Scalloway and Lerwick. The innovative scheme has been straightforward to put in place and has minimised the up-front arrangement costs and security requirements of the loan.”

Phil Caroe, director of social finance at Allia, said: “Allia is proud to have worked in partnership with Scottish Government to support the creation of over 900 affordable new homes across Scotland. The charitable bonds programme has been a great success story of using finance for social good, and we’re pleased to see that the government’s leading example is now attracting interest from other parts of the UK.”