And we think the loan component is important because it creates a discipline on the enterprise that this is a business and that the business over the medium to long term has to be able to earn trading income and pay for the money and funding it needs to operate its business.
So now, Social Traders has 10 enterprises in our investment portfolio and most of those investments we have are a mix of non-repayable and loan. But the loan component is structured so that there is a repayment holiday-period that might be up to 2 or 3 years until the enterprise is cash-flow positive.
There's no security required on the loan and the interest rate is below market rate so we are described as 'patient' investors because our objective is to get the enterprise off the ground. That form of blended capital is quite unique in Australia because typically what we've had is grant-funding available from government or philanthropy or commercial finance from the banks or more recently the social enterprise investment fund.
All of those grants and impact investments have got a place but in the middle there's a huge need for this hybrid, patient investment capital for social enterprises.
TH: Social enterprise has been the new black for corporate social responsibility objectives in the corporate sector for some time now, you yourself come from a background in the corporate sector with Rio Tinto and Toyota, some of the really big givers, what motivates the corporate sector to back a social enterprise – is it just that they want to make their stakeholders feel good about their investments or has it genuinely gone beyond that?
DB: Look I think it's a bit of both but I think what we're seeing in Australia is the interest the corporate and private sector is showing in social enterprise is leading the world. To some extent Australia lags in terms of the government policy enabling environment but I've just come from a social enterprise summit in Scotland and the Social Enterprise World Forum in Italy and I hear and see what's happening around the world and what corporates are doing here and what Social Traders is doing with some of Australia's leading businesses, is leading the world.
Getting back to the drivers, I think we're still on a steep learning curve with the business community about what social enterprise actually is but as we engage and educate around that I think the thing that appeals to them about social enterprise is these are models of addressing some serious social and community issues that has a business model around it.
TH: It's always difficult to nominate your favorite child – but can you nominate some of the stand-out social enterprise start ups that Social Traders has been involved with?
DB: Look it is really difficult to pick one or two because we've worked with hundreds of social enterprises over the past six or seven years. Joining Hands is a great social enterprise that tackles the problem of disadvantage through wellness and health treatments. It's a great demonstration that social enterprise has the ability to break the cycle of disadvantage by providing employment and strengthening Australian communities at the same time.
The other one is QC consulting, which provides an excellent vehicle for young people from refugee and migrant backgrounds to participate in meaningful and tangible training and employment opportunities. By providing business skills coaching, networking, and access to appropriate capital, we're really proud that CQ Consulting has become a successful trading arm of Melbourne City Mission."
TH: “What do you see as the future potential for social enterprise in Australia?”
DB: “I'm very optimistic. We already have a very strong and significant sector. There are over 20,000 social enterprises operating throughout Australia in metropolitan, rural and remote communities representing around 3 per cent of GDP. But I think we can potentially double that contribution – and I think we need to – to address our ongoing social, environmental and cultural issues.
We're making progress in terms of engaging governments at various levels to identify and recognise the contribution and potential of social enterprise in a policy environment and, hopefully, bring Australia in line with the role social enterprise is playing in other parts of the world.