A community finance body is calling for a £25m injection into the sector to help boost the government’s “levelling up” agenda.
Conservative MPs including former leader Iain Duncan Smith, Kevin Hollinrake and Danny Kruger, author of the recent Levelling Up Our Communities report for the Prime Minister, are supporting the proposal for the Spring Budget by the membership body Responsible Finance, which represents the UK’s community development finance institutions.
Responsible Finance is calling on the government to replace EU CDFI funding programmes with a £25m programme and require high street banks to provide the same amount in match funding.
The body said the cash was needed to maintain the capacity of CDFIs to lend to those unable to access the government’s Covid-19 borrowing schemes or obtain bank finance.
CDFIs are not-for-profit, non-bank lenders that provide responsible finance and support to small businesses, the self-employed, social enterprises and individuals.
Responsible Finance said CDFIs had a long track record of supporting viable businesses that had been turned down for funding by banks and had a particular focus on sustainable job creation, deprived regions and lending to BAME- and women-led businesses.
The body pointed to research by several organisations, including the Bank of England, that showed as many as one million small businesses and social enterprises were at risk of failing in the next year without the right support.
Theodora Hadjimichael, chief executive of Responsible Finance, said the proposal would work out to be cost-neutral.
“Many businesses will be coming out of the crisis in a weakened state,” she said.
“They will need support to reopen, rebuild and grow.
“This is where CDFIs have historically stepped in, pulling businesses back from the brink and helping them grow, create jobs and improve productivity.”
Hadjimichael said the policy would be cost-neutral overall because the £25m EU replacement grant was an offset to historical UK contributions to the EU and would be matched by new private capital.
“It will get money into communities all over the UK and give a lifeline to some of the two million businesses and people who fall into the gaps between existing Covid-19 support schemes,” she said.