Sue Peters

Fittingly, on International Credit Union Day (20 October), UK credit unions heard that the long-awaited Legislative Reform Order (LRO) for Credit Unions and Industrial & Provident Societies had been approved. There are more than 187 million credit union members making an economic and social difference in communities in 100 countries around the world. Now (or as soon as the FSA revises its rules), UK credit unions will be stepping up to match the best in the world.

The LRO will offer real benefits by allowing credit unions to grow larger and provide more services to customers. Until now, all members (i.e. savers and borrowers) of a credit union had to have something in common – normally that they live within a small geographic area. The most common effect that this had was to starve a credit union of otherwise willing savers – which in turn undermined lending ability. Now a credit union could choose to support tenants of a housing association or employees of a national company, even if some tenants or employees live outside the physical area that the credit union currently serves. Credit unions will also be allowed to offer interest on savings, instead of the current dividend system, meaning simpler and more attractive products for savers, and will also be able to pay any dividends they choose to shareholders, encouraging bigger investors too.

Historically, credit unions have only been able to work with individuals – now they will be able to provide financial services to organisations as well. That means they can work with local unincorporated community groups, social enterprises and commercial businesses, and could even lend to small businesses and civil society organisations if they so choose. We know that access to this kind of finance is one of the key challenges civil society faces, so it is fantastic that local community groups will be able to access it through their local credit unions.

Although these changes will offer lots of opportunities, it will be vital for credit unions to approach them with a degree of caution. Christina Stoneman of the Dragon Savers Credit Union in Rhondda Cynon Taff (which The Social Investment Business supports through the All Wales Credit Union Support Programme), points out that while they are looking forward to opening up credit membership to local community-focused groups as well as to local businesses, they aim to be prudent when opening their doors to this new field.

As with any expansion of services, credit unions will want to maintain their central values and ensure that new services match those values. And they will not be able to do everything: start-up capital is not to be encompassed in this brave new world, so there is still more work to be done by other lenders to support this critical area of funding.

There is little doubt that this is a positive step forward for the credit union movement as it gains momentum throughout the world. We should celebrate these new developments, and then get down to the business of helping ambitious credit unions make sure they have the strong leadership and good governance needed to enable them to expand in ways that are financially sustainable and also stay true to their mission.

At a time when many are watching the actions of some of the richest companies in the world, it seems fitting to consider how social enterprises are progressing and how their impact and growth are being measured.

The July launch of the RBS SE100 Index, which ranks social enterprises that apply to take part according to their growth and impact, is a good way to celebrate how far social enterprise has come and
how it now regards itself. There is a place for this kind of measurement and it’s only going to get better with time.

The fact that social enterprises are being compared and ranked like this speaks volumes for the growth and change in the sector. And it was good to see that it featured many organisations that have received investment from the funds we manage.

It will be interesting to see how this kind of friendly competition develops as the sector evolves further and faces more economic challenges. For now at least this list reflects its growing diversity and maturity.

It is important to consider the characteristics the organisations in the index share so we can learn more about their successes and share their experiences with those wishing to emulate them. It seems to me that the organisations all manage to match mission with money, combining a viable business model with social impact.

This business and financial planning is crucial and it underpins

the impact they can have now and go on to have in the future.

A sometimes underestimated characteristic is also good governance. How an organisation is governed is so crucial to its ability to perform and fulfil its objectives. Focus and determination combined with strong leadership lead to more successful outcomes.

I find it even more interesting that civil society organisations are breaking into other lists of top performers. For example, P3, the charity which offers a variety of services across the UK for those facing social exclusion, has been voted as one of the top 10 best small companies to work for in the UK by the
Sunday Times Best Companies listing since 2007. Of course our sector is not all about competing with the private sector but it is great for social businesses to have a presence among private companies on these kinds of lists too.

Measurement tools like the SE100 enable us to benchmark success and learn from each other. This is vital to help keep the sector growing. Passing on the knowledge accrued by trailblazing organisations in the sector will help the next generation of social enterprises to do more of the same and maybe go even further.

Sue Peters is the managing director of investments at The Social Investment Business

Having a background in ‘hard-nosed’ commercial lending, I am often asked what the differences are between investment in the commercial and social investment market places.

Commercial investment seems relatively straightforward; find a deal, collect a fee, pay out money and recover repayments. Of course, it isn’t quite that simple, but generally, it’s about looking for a good business plan, a profitable business and people with the skills to run a business.

In social investment it tends to be the people that come first, followed by the project and then the business plan. This is why there are a lot of risks involved, as often the financial stability of the business model might be seen as not being as important to an organisation as the social impact they intend to make.

In these cases it is vital to consider that business skills can be taught but the passion that social entrepreneurs have cannot. So it’s about striking a balance; supporting these passionate people to
create financially viable businesses – because without a thriving business there is no social impact.

Social investment works when it is about making sensible business decisions that will make a difference in people’s lives. To give an example, in the past couple of weeks I’ve been to the official opening of The Burton Street Foundation in Sheffield. This is an organisation we started working with six years ago through our parent charity the Adventure Capital Fund, and we’ve stuck with them through many ups and downs.

And there have been quite a few dramatic downs – at one point they were days away from closure, but now they have a thriving, redeveloped site that provides care and work opportunities to hundreds of people with learning difficulties.

The organisation balances this with hosting commercial tenants, sports facilities and meeting space, all the while providing a fantastic community atmosphere. This successful position has been reached as the result of a long-built up relationship, working together to develop business skills and understand the financial landscape to make sure they are in the strongest situation possible. It’s been about flexibility, understanding and transparency.

Social investors ask more from investees than a bank would.

We want repayment and also proof of social impact. There’s a commitment to an on-going relationship to ensure the enterprise remains healthy and continues to make an impact. It isn’t just a case of giving out the money and watching it come back in. It’s about getting to know the people and supporting and helping them develop so that their organisations can strengthen their community.

Sue Peters is the managing director of investments at The Social Investment Business