£80bn scheme a missed opportunity for businesses who won’t see a penny

CDFA’s Chief executive Ben Hughes

13.07.2012

The £80bn Government Funding for Lending Scheme “represents a huge missed opportunity for struggling UK businesses” says ethical finance chief

“Just £100m investment in local community lenders would create 20,000 local jobs overnight” says Ben Hughes

The Chief Executive of an umbrella group for locally based community finance providers today said the government had missed a vital opportunity to help the most vulnerable businesses in the UK, saying “small local businesses starved of bank finance won’t see a penny of this fund.”

Ben Hughes, of the Community Development Finance Association, added,

“Previous initiatives like Project Merlin and the Enterprise Finance Guarantee clearly aren’t getting finance to the thousands of businesses that need it most. If the Treasury really wants to support the struggling small businesses that are the lifeblood of our economy, they must channel some of the £80bn through the locally based community lenders who can reach them. Our research suggests that £100 million – just a fraction of the funding for lending money – could create about 20,000 jobs overnight if it was delivered to businesses through our tried and tested members.

“Last year our members delivered £23m in community finance to SMEs creating and protecting around 5,700 jobs, with half of all loans made to sole traders. Community finance is local, traditional and responsible, offering financial services for businesses and households turned away by the banks. Demand for their services are growing, but investment is needed to ensure they can continue to create and sustain local jobs in their communities. The Treasury needs to look beyond the big banks, and towards these local community providers who offer the traditional face to face banking style largely absent from the mainstream providers.”

What next?

Community finance providers – ethical alternatives to mainstream banks – lent £190m to UK businesses, charities and social enterprises and households in the last year, serving over 23,000 customers. Their loan portfolios have grown by 300% since 2006.

The Inside Community Finance report on the activity of the 60 community finance providers in the UK is available here.

CDFA is the membership association for community development finance institutions (CDFIs).  CDFIs lend money to businesses, social enterprises and individuals who struggle to get finance from high street banks and loan companies.  They help deprived communities by offering loans and support at an affordable rate to people who cannot access credit elsewhere.

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