Community finance: social loans for your social enterprise
The Guardian, by Ben Hughes
With £145m lent to social ventures last year, Community Development Finance Institutions (CDFIs) are leaders in providing financial services. The Community Development Finance Association (CDFA) represents them, and at our annual conference last week keynote speeches from the business secretary Vince Cable and minister for communities and local Government Don Foster highlighted some uncomfortable truths. The most notable was that no one knows what CDFIs are. This needs to change.
Community finance isn’t new. CDFIs have pioneered the delivery of fair and affordable finance to social ventures unable to access finance from banks for over ten years. They’ve lent over £830m to almost 3,500 social ventures since 2004. In addition, CDFIs also provide access to credit to businesses in disadvantaged communities and households facing financial exclusion. They drive economic growth and stimulate community action.
You may well have heard of CDFIs such as Charity Bank and Triodos – both CDFA members – specialising in lending large amounts to large scale projects. But we have other members across the UK offering a mix of finance to social ventures. They provide credit to social enterprises for the likes of working capital, equipment purchase and other business operation support.
From a large scale wind farm in Avonmouth to a small community childcare scheme in Hull, CDFIs invest in worthwhile projects, large and small. Our members provide a local service; they know their communities and provide specialist support and advice in addition to finance. With interest rates offered between 5-19% (typically 8%), charges reflect the level of risk offset by the social and economic value of the investments made.
While banks pull down the shutters, demand for community finance grows: Enquiries this year have soared by 88% on 2011. Last week business secretary Vince Cable announced a £60m fund for CDFIs, using funds from the Regional Growth Fund, Unity Trust Bank and Co-operative Bank to help meet some of this demand. Whilst this is a welcome boost for CDFIs lending to businesses and social enterprises, £60m accounts for only four months of CDFI lending, and does not support community finance for households currently using high cost credit.
Our vision is the provision of access to credit to every social enterprise, business and household. To achieve this, community finance needs to be at the heart of the financial services sector.
Social enterprises can help us to help you by spreading the word: vote with your feet and talk with a CDFI next time your social enterprise – or small business, or household – needs access to ethical, affordable finance.
Spreading the word about community finance will also go a long way in attracting capital into the sector and scaling up our members’ operations. Tell other social enterprises about community finance. Lobby your local MP for support. There will be a CDFI in your region that needs your help to grow, allowing them to further distribute wealth throughout your community.
Now is the time for community finance.