Future ‘hangs in the balance’ for community finance providers despite 300% growth

Post Reporters
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The ability of community based finance providers to serve hard-to-reach markets ‘hangs in the balance’ – their umbrella body warned today.

The Community Development Finance Association (CDFA) said policy changes and new structural and funding frameworks should be put in place to help existing community finance providers expand and new ones launch.

It called for ‘a more just financial system where access to fair and affordable credit is a given right for all UK businesses, civil society organisations and households’.

The call comes alongside the latest annual survey of community development finance institutions (CDFIs), Inside Community Finance.

This reveals that CDFIs lent about £190m to UK businesses, charities and social enterprises and households in the last year, serving over 23,000 customers.

Where mainstream banks and financial institutions are unable to lend, CDFIs are doing so – and have a total loan portfolio which has grown by 300% since 2006.

The report found that in the financial year to 31 March 2011, CDFIs:

  • disbursed about £190m in finance to 23,000 customers
  • of which £23m was lent to 1,500 businesses
  • which generated £171m turnover, creating or safeguarding over 5,700 jobs
  • £145m was lent to 390 charities and social enterprises
  • and £13m was lent to 21,000 households
  • with over 12,000 people saved from predatory lenders or loan sharks

The total value of the CDFI loan portfolio has increased dramatically to £714m outstanding last year, a 35% increase on 2010 and over 300% greater than in 2006.

Ben Hughes, the CDFA’s CEO, said: ‘The daily impact achieved by CDFIs, in providing essential financial services to those unserved by other providers is remarkable. They provide a lifeline to financially excluded households, offer the working capital to stimulate new social ventures and boost ailing economies across the UK through their SME investments. But their tried and tested role has never been more needed.’

Harry Glavan, the CDFA’s head of policy and communications, and the author of the report, said: ‘Despite having demonstrated that community development finance delivers a strong return on investment, the quality and quantity of support CDFIs might secure is unclear. The ability of CDFIs to deliver their primary mission of serving hard-to-reach markets hangs in the balance.’

The Inside Community Finance report is available to download from the CDFA website.