Labour has published proposals for a policy that it says would force banks to lend more in deprived communities and encourage lending through third sector financial institutions.
In an interview with Third Sector, shadow charities minister Gareth Thomas said that proposals in Open Banking: Building a Transparent Banking System, written by him and Chris Leslie, the shadow financial secretary to the Treasury, would require banks to reveal what they lent in each community and to lend a minimum amount in every community.
He said that where banks did not want to do it themselves, there would be an opportunity for them to lend through credit unions or community development finance institutions. "Potentially it’s a new role for charities and a new source of income for the sector," Thomas said.
A similar concept has operated in the US since 1977 under the Community Reinvestment Act.
Thomas said that there would be no attempt to introduce the legislation while in opposition, but it has the potential to become policy if Labour comes to power.
Ian Best, policy officer at the Community Development Finance Association, the umbrella body for community development finance institutions, said the new policy would have substantial benefits for his sector. "Perhaps the main benefit would be clear information about where there’s not sufficient lending and where there’s the greatest need for CDFI services."
- Read our interview with Gareth Thomas