The Community Development Finance Association will receive £60m to lend to social, small and micro-enterprises, the business secretary Vince Cable has announced.
The scheme is aimed at creating more than 8,000 jobs in deprived areas of England and boosting local growth over six years.
The CDFA, the umbrella body for community development finance institutions, will receive £30m from the government’s Regional Growth Fund. The Co-operative Bank and Unity Trust Bank will each contribute £15m.
Responding to the announcement, Nick Temple, director of business and enterprise at Social Enterprise UK, the membership body for the social enterprise sector, said: "£60m worth of investment for SMEs and social enterprises through the CDFA is a very welcome step and signals a clear commitment from the government – notably, a commitment matched by prominent social banks – to grow the UK’s social investment market.
"It will strengthen our social economy and help civil society organisations and social enterprises access sustainable funding, which has proved difficult in these austere times. We hope to see similar initiatives in the future."
Ben Hughes, chief executive of the CDFA, said the investment was crucial to the survival of many small and micro-businesses that would not exist without this support.
"It’s a milestone, yet just the starting point for an exciting and timely expansion of the community finance sector," he said. "Greater investment like this offers a new way of creating wealth that’s sustainable and ethical but also makes sound business sense."
The £60m fund is aimed at providing a source of funding for enterprises that can struggle to access finance from mainstream banks and loan companies.
Cable, who made the announcement at CDFA’s annual conference yesterday, said: "We need effective channels to support small business, which is why the CDFA and its members are so important for providing access to finance and kick-starting the economy."
The RGF is a £2.4bn fund for boosting the economy and creating jobs, particularly in areas that have relied on the public sector as the main source of employment. It will operate across England until 2015.
Richard Wilcox, managing director of Unity Trust Bank, said: "As a social enterprise ourselves, UTB’s support for the CDFA and the RGF builds on our long-held commitment to the social economy sector as a powerful engine for growth, jobs, enterprise and positive social change in communities that need it most."
Keith Alderson, managing director of corporate and business banking at the Co-operative Bank, said: "As a cooperative, we fully understand the important role small businesses play in communities by creating and sustaining jobs and helping to develop local economies."