CDFIs struggle to meet huge rise in demand for loans

Economic and Social Research Council-backed report finds 'serious shortfall' in available funding

Many community development finance institutions do not have the capital to meet large rises in demand for loans, research carried out for the Economic and Social Research Council has concluded.

Lindsey Appleyard, the research associate at the University of Nottingham who carried out the research, said there was a "serious shortfall" in the funding available for CDFIs to lend to groups and individuals in underprivileged communities.

Appleyard said that loan applications to one CDFI, the Aston Reinvestment Trust in Birmingham, had tripled in the six months to March 2009 compared with the same period the previous year.

Many more organisations also reported rises in demand for loans but did not have the capital to meet the increase in demand, she said.

"If the sector is to challenge inequities in funding for enterprise across the country, it needs more support from banks and from the Government," she said.

Bernie Morgan, chief executive of CDFI umbrella group the Community Development Finance Association, said the research was timely.

"It is time to boost investment in CDFIs, which are facing unprecedented demand from people who simply have nowhere else to turn. CDFIs are sorely undercapitalised," she said.

"If the Government is serious about delivering real help now to communities, it should allocate more resources to CDFIs – which will very quickly deliver finance where it is needed."

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