For ten years, as part of our work to support stronger and greener local economies, Ecotrust Canada operated a loan fund – a bold and important early experiment in the field of social finance in Canada. We completed 87 mission-based loans over 10 years, dispersing $10.7 million in total loans, leveraging $40 million in additional loan capital, and creating almost 900 jobs in some of the most remote places in BC. Our 10 year experiment demonstrated that if we are serious about social enterprise and market innovation, we have to deploy capital in new ways.

Lesson Five: Find a niche

Wherever possible, we worked with entrepreneurs to build their businesses, demonstrate good cash flow, and then move them to more conventional lenders 3-4 years in. This strategy proved effective both as a pipeline strategy for the bigger banks and as a way to manage our own limited capital.

While we are all champions for the little guy – the high risk entrepreneur with the wildly wonderful idea who is barely hanging on by his fingernails, the current reality is that growing the social finance field quickly and well requires building trust with more conventional lenders. This will mean focusing in the early stages on a few larger, safer, bundled product-like propositions where the rules of engagement are clear, the interest rate is reasonable, the social/environmental advantages are tracked for story-telling but not ‘monetized’ as a substitute for financial returns, and the exit is easy at 5-7 years. With a few successes of this calibre under our collective belts we will garner some friends who might be willing to take a chance with their cash.

Lesson Six: It isn’t just about money

By operating the fund side-by-side with Ecotrust Canada’s charitable programming, we established and demonstrated the incredible value of working as an intermediary. Our program staff were able to identify potential deals, do early-stage loan work-ups to increase the likelihood of success, provide ongoing technical assistance to loan clients, advocate for a supportive policy environment in the fields in which we were operating, provide an early warning system, and propose ways to restructure deals that were at risk.

Through the lens of our experience, we have seen that the need for funded intermediaries is a very real part of building the social finance field – for deal flow, for creative deal design, and for ongoing technical support.

Excerpt from a speech given by Brenda Kuecks as part of the “Impact Investing in BC: The Way Forward,” conversation, part of the Social Enterprise Catalyst event in Victoria on April 2nd.