The value of funds lent by community development finance institutions fell by a quarter in the year to the end of March 2008, according to figures from the Community Development Finance Association.
The total value of loans went down from £105m in the year to 31 March 2007 to £76m in the following year, a survey of CDFA members found.
A spokesman for the association said the fall could be attributed to an unusually large amount of lending in the year to March 2007 - most of it by one large social enterprise lender that made a number of exceptional loans. The year to March 2008 represented a more typical level of lending by CDFIs, he said.
However, the total value of investment and loan portfolios held by CDFIs grew by 15.3 per cent to £331m in the same period, of which about £230m was on loan to social enterprises. According to the CDFA spokesman, demand for the services of CDFIs had risen significantly after the report was produced because they were lending to more businesses and individuals who would previously have been served by banks.
He added that members of the association had been hit because the level of income from money held on deposit with banks had fallen and many CDFIs had made loans that were linked to the base interest rate.
Many CDFIs had also seen a rise in their default rates, the spokesman said.