New community finance chief launches campaign for "Just Finance"
Social Enterprise Magazine
Some 3,300 social enterprises are financially excluded and would benefit from community finance. Ben Hughes, new boss of the Community Development Finance Association explains why his members can help – and how we need to innovate together to deliver “Just Finance”
Access to fair and affordable finance is vital. Social enterprises, like small businesses, community organisations and households cannot thrive or survive, without it. Yet the gap between the availability of affordable finance and demand from viable, credit-worthy customers is not only wide, it is increasing.
Social enterprises are increasingly providing many essential public services. But they often find it difficult to access capital. The single largest barrier to the sustainability of social enterprises is access to finance, with 44% saying that they are still hampered by the availability and affordability of finance (Fightback Britain, Social Enterprise UK, 2011).
Finance is particularly critical now, with public spending cuts estimated at between £3.2bn and £5bn; a thriving social enterprise sector is essential. It is unjust that so many social entrepreneurs are stifled in making their visions a reality due to the lack of appropriate credit.
There is a tried and tested solution. It’s called Community Finance.
Community Development Finance Institutions (CDFIs) have been quietly providing community finance to some of the most disadvantaged communities in the UK for more than ten years. CDFIs are themselves social enterprises that invest in markets underserved by mainstream financial institutions.
By and large, CDFIs are run by and for the local community, aligning capital with social justice, providing affordable credit to businesses, social enterprises and households unable to access credit from high street banks. But CDFIs lend responsibly, investing only in those customers whom they believe can repay the loan.
CDFIs take an holistic approach to their customers. They not only invest in their communities by providing money but also by providing advice and support to help social enterprises prepare business plans and develop their skills. Alongside the economic benefits generated by CDFIs, they also generate positive social impacts, strengthening the social and economic cohesion of neighbourhoods and communities.
In the year to April 2011, CDFIs disbursed disbursed £177m of loans to 23,000 customers; providing £146m of loans to social enterprises. Interest in community finance is thriving. Yet many CDFIs are struggling. Many have depleted loan funds and are struggling to serve their customers, and are far from being able to serve all communities across all markets in the UK. CDFIs, just like their customers, are starved of access to appropriate and affordable capital to lend on to customers. Few CDFIs are currently achieving financial sustainability.
More support for community finance and community development finance institutions is needed now. Community finance needs to grow. That’s why the CDFA is today launching a new, simple and ambitious plan for growth, and celebrate the innovation that so many CDFIs demonstrate by announcing the winners of our Innovation in Community Finance Awards.
Our vision is that:
“By 2017, community finance will be recognised as a household concept with CDFIs playing a key part. Banks, government, independent service providers and corporate bodies will all have a stake in increasing access to finance. The principles of social investment will be driving fiscal and social policy, with the Treasury having a dedicated unit that is generating significant community finance wholesale funds.”
The CDFA has a central role to play in pursuing social and economic justice by building the CDFI sector. But we cannot do it alone. Fair and affordable finance is an issue affecting all of us. Just Finance provides a simple framework to grow both supply and demand, so all communities have the access to high quality, affordable financial services able to drive wealth creation across the UK.
Join us in creating a shared endeavour to achieve a step change. Our 10-point plan of what is needed to deliver Just Finance is below – full details are available within “Just Finance” which you can download here from 1st February. Please add your voice of support.
The 10-point plan:
1/ Enshrine government support of community finance as an H M Treasury remit
2/ Require finance service providers to disclose lending data
3/ Integrate and embed community finance into the larger financial services system
4/ Create a community Finance partnership scheme
5/ Launch a nationwide bank-to-CDFI referral system
6/ Support and grow mentoring and advisory services
7/ Communicate, publicise and promote community finance
8/ Set up a CDFI Fund
9/ Drive social investment into the community finance sector
10/ Develop an array of specialist funding streams