Loan finance is not well understood by the sector, particularly by trustees, according to chief executives who have voiced concerns over negative attitudes towards 'debt finance' in a new report.

Making Good in Social Impact Investment, produced by the Social Investment Business and TheCityUK, surveyed around 50 chief executives whose organisations had been funded by the Social Investment Business. They were asked their views on social investment. Many said that social investment, especially loans, were not well understood by the sector, especially trustee boards, and called for better financial literacy on the subject.

Dai Powell, chief executive of the Hackney Community Trust, who was interviewed for the report, said: “Cultural change is needed to get the organisation to accept the concept of loan finance, investment involves a whole new language that the organisations may not be familiar with.

“One of our greatest challenges was convincing our board, but what convinced them in the end was hard numbers.”

Rachel Talbot, chief executive at Cambridge Citizens Advice Bureau also commented: “Many boards are conservative about loan finance – it’s not always understood that charities and social enterprises are businesses, ‘social mission’ businesses. Our board recognised this and the business case for taking a loan to buy a property. It allowed us to think strategically.”

The report, which is an in-depth overview of the social investment market in the UK, with input from a range of key players, concludes that social investment is an emerging market that has passed a watershed, with sufficient investment track-record building to start attracting mainstream investment.

It also says: “The UK should have a leading role in this exciting new emerging market and could be an unparalleled global centre for social impact investing.”

The report is being launched officially today by Oliver Letwin MP. It is written by Dr. Rupert Evenett and Karl H. Richter.