Allia is working with the Scottish Government to fund the development of affordable housing across Scotland, helping to invest more than £50 million in charitable bonds over two years, which will provide support for almost 1,000 new homes.

The bonds provide a new source of finance for housing associations, and are ethical financial products – no profit is taken by Allia, who issue the bonds on the Scottish Government’s behalf.

The interest on this loan to Lochaber Housing Association, over half a million pounds, is converted into a charitable donation, which the Scottish Government gives to housing associations for the construction of new social housing.

There has been considerable success with previous charitable bonds that have been issued with total investments now over £40m. This seventh bond means development finance has now been provided for 581 affordable homes, and generated over £9m for charities of which £6.7m will go towards the construction of new social housing.

Housing minister Kevin Stewart said: “Good quality, affordable housing is essential to help attract and retain people in Scotland’s remote and rural communities.

“We have committed to deliver 50,000 more affordable homes over the next five years, backed up with investment of more than £3 billion. Announcements such as this one today marks another step on road to delivering that pledge.

“Innovative financing schemes such as charitable bonds play a major role in helping us deliver this major expansion in housing supply. We invested £25m last year and have committed to invest the same again this year and we remain the only Government in the UK to do so.

“Through these bonds we are also maintaining Scotland’s leadership in financial innovation, working with partners to deliver more for less public investment.”

Blair Allan, chief executive of Lochaber Housing Association, said: “We are delighted to have secured access to this Scottish Government backed charitable bond. This sort of flexible and unsecured lending is ideal for a small housing association such as us, enabling the Association to continue to plan and deliver even greater numbers of affordable housing opportunities to address the area’s acute housing needs.

“Partnering with our Allia colleagues on this innovative funding model has been very straightforward, and we look forward to enjoying our continuing and productive working relationship with both them and the Scottish Government into the future.”

Phil Caroe, director of impact finance at Allia, added: “Following the success of last year’s charitable bond programme for Scotland, we’re delighted to have made the first allocation of this year’s funding to Lochaber Housing Association. Working together with the Scottish Government, Allia has now channelled over £40m of investment into developing affordable housing across Scotland.”