Community lenders generate £100m for UK's local economy

Community Development Finance Institutions, the UK's flagship community lenders, have generated over £100m in extra economic value for local communities and have secured over 2,600 jobs in English towns and cities according to new figures from the Community Development Finance Association (CDFA). CDFIs are social enterprises that deliver fair finance to those unable to get credit from the banks.

The CDFA, which represents the network of CDFIs in the UK, also found that loans made by its members have delivered economic value worth more than five times the original funding – benefitting just under 700 businesses, the government and local communities. 

The loans were made possible through a government-backed fund specifically aimed at supporting small businesses and social enterprises in England. The £60m Regional Growth Fund (RGF) – half of which is funded by the government and the other half by Unity Trust Bank and the Co-operative Bank – has so far lent £17.3m. 

Peter Kelly, business development and marketing director at Unity Trust Bank, said: “The social economy is a powerful engine for growth and is driving positive social change through enterprise and job creation. Important programmes such as the RGF have enabled Community Development Finance Institutions (CDFI) to provide improved access to affordable finance."

Government figures show that small businesses in the UK create 60% of jobs and 50% of national GDP but despite this micro enterprise and small and medium enterprise loan rejection rates from mainstream banks have soared from around 5% in 2004 to over 20% in 2012.

The value added demonstrates that providing loans through the alternative finance sector is the best way to turn government funding into long-term sustainable finance.

In order to expand, replicate and sustain the community finance model made possible through the RGF, the CDFA are calling on the government to introduce a new annual £150m fund. 

Ben Hughes, chief executive of the CDFA, said: “We are calling on the government to reinvigorate its commitment to economic growth in communities across England with a further £150m of funding. The value added demonstrates that providing loans through the alternative finance sector is the best way to turn government funding into long-term sustainable finance for local communities and businesses."

He also said that the proposed £150m fund "could unlock significant private sector investment of up to £600m". 

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