UK: New report says CDFIs may fail without government support

A new report finds that innovative organisations providing lifeline enterprise lending in some of the UK?s most deprived areas are not reaching their full potential, partly as the result of short term and patchy government funding and policy support.

Community Development Finance Institutions (CDFIs) first came to prominence in the UK ten years ago to provide loans to people and enterprises excluded from mainstream finance. They were designed to create a positive cycle of investment, re-development and opportunity for some of the UK?s most disadvantaged communities by providing much-needed capital.

Now, the New Economics Foundation (NEF) ? an independent think tank – has conducted an in-depth survey to take stock, evaluate CDFIs achievements to date and inform the next stage of their development.

The report, Reconsidering UK community development finance, released on 21 June at Money for Change, the annual conference of the Community Development Finance Association – the umbrella body for CDFIs – finds that the future of CDFIs is uncertain as government and policy-makers have begun to question whether CDFIs have measured up to initial expectations. To answer this, the Reconsidering UK community development finance report provides the first comprehensive assessment of just how effectively enterprise-lending CDFIs address exclusion and disadvantage, and the policies and operating conditions that affect their ability to do this.

The report finds that sustainability may only be possible for those CDFIs that provide larger, secured loans for property or social enterprises and that government policy has not provided CDFIs with the support that they need to fulfil their potential, government funding has been short term and patchy and support from the financial sector has also been inconsistent and often limited.

The full report can be downloaded from www.neweconomics.org