The growth of community development finance initiatives could grind to a halt unless the Phoenix Fund is extended beyond 2006.
Bernie Morgan, chief executive of the Community Development Finance Association, issued the warning after a report revealed that community development finance is expanding across the UK at an unprecedented rate.
Inside Out: The State of Community Development Finance says there are now 4,292 CDFI loans making up a loan portfolio of £106m nationally.
The Government's Phoenix Fund provides around a third of the total portfolio, making it the second highest investor in CDFI behind banks. It set up the fund in 1999 and has yet to commit to expanding it beyond 2006. "We are concerned that the withdrawal of the fund will not just halt growth, but undermine developments it has spawned," said Morgan. "If the sector is to consolidate, a continuing, stable funding environment is vital."