Social investment is not reaching its potential because trustees feel "alienated" by the language used, the chief executive of Leonard Cheshire Disability told a fringe event at the Conservative Party Conference yesterday.
Clare Pelham, who has headed the disability charity since 2010, told the event, organised by charity leaders body Acevo and social lenders Big Society Capital and the Social Investment Business, that she believed that social investment "has something really valuable to offer", and that it was "odd" that it had not taken off.
But she said she was not surprised to see trustees pause at the thought of social lending.
"Trustees are very prudent, and rightly prudent, with charities' money," she said. "No one wants to be the person on whose watch the charity goes down. Even people from the City who take big risks in business are very cautious on charity boards."
She said the social investment sector had to be careful not to lecture charities or imply that trustees were acting foolishly.
"There's something to be learned from consumer-oriented companies," she said. "When we had a product that people weren't buying what we didn't do was tell them they were wrong. Instead, you need to look at yourself, your marketing strategy, and how you represent yourself.
"We need to win hearts and minds. You have to start where your customer is.
"We need to talk a bit more about how social investment can change the world, and a bit less about technicalities.
"When we become experts in something we start from a place that's completely other. We use different language and think in different ways. But it's important to inform yourself of where people are and where they're starting from.
"We need to start where the customer is. If we did that, the sector might feel a bit less alienated by the product."
Nick O'Donohoe, chief executive of social wholesaler Big Society Capital, also said that the sector "has to do a better job of explaining social investment to charities.
"Social investment is just not relevant to a lot of charities," he said. "But we feel we need to address the trustees of the 75 per cent for whom it's not relevant."
He said the social investment sector needed to build capacity among charities so they understood the risk that investment entails.
"This isn't something which fits naturally with the culture of these organisations," he said.
O'Donohoe said another problem with social investment was the cost. He said in many cases small loans to social organisations "are too expensive to be cost-effective" and always would be.
"We need to work with other organisations to provide blended capital," he said.
He also said the social investment sector needed procurement reform to be cost-effective, because much of the purpose of it was to help charities win government contracts.
"It's not a question of voluntary versus private," he said. "It's a question of big versus small. To diversify the market the government needs to take a bit more risk with technical things like parent company guarantees."
