At Zync Digital, we aim to be the number one digital marketing partner for social enterprises and credit unions in the UK. We spoke with Richard Collier-Keywood, Chair at Fair4All Finance and The School for Social Entrepreneurs, to find out his thoughts on how important both of those sectors are for the UK at the current time.
Introducing Richard
Anthony: Today we're joined by Richard Collier Keywood. We’re a digital marketing agency for credit unions and social enterprises, and as you'll find out shortly, Richard is the perfect person to speak to given his position across both of those sectors. Richard, would you mind just introducing yourself for us, please?
Richard: Good morning, Anthony and the rest of the team at Zync. Yes, I'm Richard Collier-Keywood and I’m the Chair for Fair4All Finance and the School for Social Entrepreneurs. Before that, I’ve had a mixed career working for a large accounting firm and also working in a policy role for government as well.
Discussing Social Enterprises
Holly: Hi Richard, my first question for you is, when did you first become aware of social enterprises and what inspired you and encouraged you to get involved with them?
Richard: I think my first involvement with social enterprises came in the early 2000s. When they started to be a movement of purpose-led businesses. And in a broader sense, it seemed to me to be a really good thing that suddenly business were not just focused on shareholder profits, but focused on delivering a lot of other things to other stakeholders. I was so impressed by many leaders of purpose who were trying to create social change. They were just doing it through a business model rather than the charity model, nd it seemed to me that that was a fantastic movement to support.
Andreia: We can see that you're involved with various projects. So what has changed about social enterprises since you started?
Richard: What they've tried to do is to bring more and more resources into the social enterprise sector to make it more mainstream, if you will, to challenge existing businesses as to what their purpose is. It’s very infectious if you meet someone who's incredibly passionate about creating social change through a business model. And, if you introduced them more widely, it's funny how many business leaders then think about how they're trying to influence stakeholders, trying to bring more resources into the sector and trying to use them as a model, as a challenge to create a wider movement of purpose led businesses.
Holly: What do you think, Richard, makes social enterprises different, and what do you think the organizations like the School for Social Entrepreneurs do to help them?
Richard: I think what makes social enterprises different is that they have a business beyond profit. So they're doing something else - they're targeting some element of social change or some element of social injustice. And they're changing that too, largely through a business model. The challenge is often that the market they're trying to influence is not a strong market. So they have to find proxy markets and find other people to pay for what they're doing or they have to find some elements of subsidy to make those markets work. And, what's amazing is the people involved.
They have often got personal experience of the issue that they're trying to change, and that makes them, one, very authentic, but two, very good at it because they've actually been through it themselves.
And then you come to us to see and I think what SSE does really well is takes people like that and pulls them together into learning cohorts. So groups of 10, 12 people and helps them learn together, bringing more people into the room who've had experience of particular issues that they're facing.
It could be, you know, how do you market to this group of people? How do you manage cash flow? What does it mean to others in a business structure? How can you increase your income? Whatever the area that the social entrepreneur is facing, there's probably someone else who's face that issue before.
And so, we bring people into the room with you can tell stories about how they've overcome some of that and been successful in that sometimes. So as I say, it brings people together. We train social entrepreneurs and create the networks and relationships that really helps their social enterprises flourish.
Andreia: Should more businesses try to be social enterprises? If so, how can they do that?
Richard: Today, you have obligations as a business leader to think about the broader community of interest, not just that of your shareholders. And a lot of the time, quite frankly, the body of interest is actually helpful to your shareholder return if you have more engaged employees because they love what you do, and if you have a more engaged community around you because they respect what you do and you give back to them. There are benefits to the core business, so I think there's a great deal of synergy that can be had from thinking about the wider group of stakeholders.
Holly: A final question about social enterprises for you, Richard, is that do you think there's anything the social enterprise sector could do to improve?
Richard: Okay, so I think they already do a very significant amount and a lot more than what's happening. I think because the UK does a great job as a trade association for the for that sector and there's training institutions like the School for Social Entrepreneurs being one of them, which do get a lot more profile for the social enterprises.
What more could they do? I think, first of all, working actually on problems together would be helpful. I mean, there are lots of social entrepreneurs working on largely the same problem. I think if there was a way that we could bring them together and be more problem focused. Bringing people together, working together on the same issue, they’ll learn a lot from each other, and they'll also get a greater degree of awareness in the broader community that is an issue that a number of people are working on.
I think the second thing, is it would be good if the sector could come together to think about some of the policy changes that might help the sector to grow even more. The availability of finance for the sector are often quite small grants, but they could make a big difference if you're starting a business. But then how do you get the first wave of or the equity loan influence? That's a lot harder to do if you're a social enterprise. I think people coming together and working through how that can be done in a more systemic way, in a way that probably recognizes also that they're not going to make the same degree of financial return if they just focus on a pure business model. If we can increasingly focus on the impact return as a sector, we could attract more capital and therefore do a lot more in terms of social change.
Fair For All Finance
Anthony: I can totally agree with everything you said Richard. I'm a fellow of the SSE and that kind of that kinship and shared learning of failures as much as successes, the accelerated our business from one level to another. In terms of embodying that kind of social enterprise identity, I think credit unions, community banks and CDFI’s, live and breathe those values for the communities in which they serve. In terms of your role with Fair for All, could you just tell us a bit more about who they are and why they exist?
Richard: At Fair for All Finance, we exist to promote financial inclusion largely focused actually on England, but we also do collaborate with Wales, Scotland and Northern Ireland as well.
Discussing Credit Unions and Ethical Finance
Pooja: Recently, the government announced over £800 million in dormant assets would be distributed. So in your opinion, how could community and ethical finance benefit from the use of these funds?
Richard: £800 million sounds a lot of money, but actually we calculate that the gap in the market between the amounts of available credit and the amount of credit that's needed by people who can't borrow it from mainstream banks may be as high as £3 billion.
So in reality, when you're trying to target such a major gap, it’s a relatively small but significant drop in the ocean. And to put in context. CFOs and credit unions do a fantastic job of bridging that gap.
One of the roles of Fair4All Finance is to channel some of that money to organizations to scale up, to meet some of that gap. And we do it through channeling equity and also debt finance to those organizations.
At the moment, we're working with Treasury on a program of piloting low interest rate loans, where people who borrow money don't get charged interest on it. We're about to embark on a program of supporting consolidation loans, giving people, the opportunity to reduce the interest rates on their loans and to spread them over a longer period of time. So enabling them to reduce the amount they have to repay and to support that program with a number of credit unions and CDFI’s.
Anthony: Something that we can come into all the time is, whenever we talk to people about what we do, quite often a lot of people don't know the first thing about a credit union or community bank. How would you describe one to somebody with no prior knowledge of what they are?
Richard: So a credit union is an organization that really exists for the benefit of its members. They put money on deposit with the credit union and hopefully receive a good market-based return. But also, possibly critically, they're able to borrow money from the credit union at a rate of interest that's fair and affordable and is actually capped by legislation at just over 42% a year. And they support their members with new products which are right for them and for the lives that they live. And oftentimes, those products just do not exist within the traditional financial services sector or they can't access them because of thin or difficult credit funds.
Pooja: So what would you say is the biggest challenge facing credit unions at the moment?
Richard: I think some of the challenges today would be, first of all, with all the changes in the current interest rate in the UK, it's quite challenging to work out the degree of security that they might have with many of their members.
Many people today are facing an almost unprecedented cost of living crisis, where they may or may not be able to pay for food and heating combined.
If you're trying to get a loan, it's very difficult for people to look at past and future expenditure when inflation is running at 10%, when people are concerned about failing employment prospects in this country. There's a lot of things that could change to create a lot more risk.
I think the second thing would be to have to get deposits in, to be able to lend. That's kind of how it works. Pricing some of those deposits against a rising interest rate market must also be fairly tricky to maintain their capital and to provide services to their members.
Anthony: So with that in mind then, Richard, what would you say is the key distinction between credit unions and CDFIs between, say, high street banks, for example?
Richard: The main distinction is that credit unions exist for the benefits of the members. And they really focus very strongly on trying to provide services that are appropriate for their members. There are no outside shareholders that benefit from any profits or surpluses that are made. All those profits and services go back to the members who make up that credit union, and that mutuality is a very powerful model that should enable risk to be shared among the group of members, which would enable a better overall provision of services.
Pooja: Our last question would be, how would you say the current cost of living crisis is going to affect the economy in the next 12 months?
Richard: That's a very big question! Well, I think the starting point for that is obviously the cost of living crisis. What impact will impact different people differently? And it will probably impact the people who are the most vulnerable, the most.
If you think about your costs are basically going to go up by 10% plus over the course of the next year you're going to be worried about food prices. You're going to be worried about your utility bills, heating, and so on. That really puts a dampener on anything else you might spend.
So the reality is you've got inflation rising at around 10%. A large group of consumers are going to be increasingly cautious about what they spend money on and any discretionary spend they may choose to save.
So all that will reduce demand in the economy, and that's probably helpful to deal with inflation a bit. But it probably won't help a lot of small businesses who are very vulnerable to even relatively small changes in demand. So I think the concern is that the current environment, the customer crisis grows out of being something of concern just for individuals and goes into the business sector, reduces demand and may lead to businesses pulling back investment.
That could lead to businesses delaying investments they might make and even reducing people who work for them, which again, puts a further spiral into it with more people becoming unemployed.
One of the ways of doing that is making sure that the government encourages people to spend money on investments that actually mean more money flows into the economy. Individuals can help here, too, by actually spending money more locally, spending money with businesses that they know are vulnerable. I live in a very small village, and I know that if I don't spend money in the village shop every week, then that village shop is going to eventually it'll have to have to close. You've got to spend money locally. You've got to support your local businesses with money.