Community transport charity HCT Group has taken on a £500,000 loan from communications social enterprise the Phone Co-op – one of the first examples of a sector body making a direct social investment in another.

HCT chief executive Dai Powell said that he felt more organisations should follow suit and lend or borrow from within the sector.

“We have always said we want to buy social in our supply chain,” he said. “Why not buy social with the people who supply our money, too?”

He said it was “barking” that more charities and social enterprises did not have sector bodies in their supply chain.

“This is about trust,” he said. “We trust them. They trust us. They have money spare. We need money to grow. It makes perfect sense. It should be done more.”

Powell, whose charity has grown its turnover from £20m to just under £38m in the past five years, said he was a “fan of social investment in general” because it enabled charities to grow rapidly and reach more beneficiaries.

In 2010 his organisation agreed a £5m package of social investment, including a £2m “social loan” which provided a return to the investor based on a growth in the charity’s turnover. This type of investment is known as “quasi-equity” because it is intended to have many of the same characteristics as equity – shares – in a for-profit business.

Powell said he is now likely to go back to the market for another round of finance, and that it is likely to once again involve a social loan.

“We’re surprised that more people haven’t used to social loan model,” he said. “Quasi-equity works. It enables you to do things you couldn’t do with loan finance. It enables you to access other money you couldn’t otherwise access.”

Vivian Woodell, chief executive of the Phone Co-op, said: “At the Phone Co-op, we like to ensure that the way we invest surplus cash means that it is working in support of our values, so that it is not just us who earn a return but society as a whole. This is why we have chosen to invest in HCT Group.  We’ll earn a return, but so will society.

“We believe that all organisations with a social mission should look to invest not just with a view to maximum returns, but with a view to the positive difference their investments can make."

The terms of the most recent loan have not been disclosed, but Powell said it was an "ordinary, market rate loan".