Community Development Finance 'needs a boost'

Patchy and short-term Government funding and policy is stunting the development of Community Development Finance Institutions and putting their future in doubt, according to a survey by think tank the New Economics Foundation.

The survey of more than half the CDFIs in the UK also looked at banks, policy-makers and funders. It found that support from the financial sector had been inconsistent and often limited. Seventy-two per cent of CDFIs said they were unable to access funding that would support increased outreach.

The report contains a number of recommendations based on a study of CDFIs in the US and Europe. The main one is that the Government should establish a fund to support the further development of CDFIs. "Their social purpose means that many cannot be, and never will be, completely sustainable," the report says.

Other suggestions are for banks to implement a formal strategy of engagement with CDFIs and for Regional Development Agencies to facilitate partnerships between CDFIs and other agencies.

Released yesterday to coincide with the Community Development Finance Association's annual conference, the report also said there was increasing disillusion among politicians and investors about the ability of CDFIs to fulfil the high expectations that accompanied their launch ten years ago.

The hope at the time was that the provision of loans to people and enterprises excluded from mainstream finance would create a positive cycle of investment, re-development and opportunity for disadvantaged communities.

Jessica Brown, head of access to finance at the New Economics Foundation, and co-author of the report, said CDFIs were at a critical juncture. "Without renewed support the sector will become increasingly fragmented and weak," she said. "CDFIs could wither and many may disappear, providing another set-back to disadvantaged communities."

She added: "With the right support from Government, regional authorities, funders and banks, CDFIs could play a major role in addressing issues of access to finance in the UK."

The full report, Reconsidering UK Community Development Finance, can be downloaded here.


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