Monday 9 August
We were delighted that as a result of our Money for Change campaign – launched last year in the House of Commons – CDFIs have been mentioned as key to the financing of disadvantaged entrepreneurs in the government’s Finance Green Paper. This is the result of hard work by the Board, members and cdfa executive. Being invited to discussions on future policy, as we have been, is also a key outcome. While the future is uncertain, we now have opportunities to influence it, which we wouldn’t have had without the campaign. Ever onwards!
Stephen Green, Chair of the British Bankers Association has written to the Chancellor on behalf of our six biggest banks to outline the work of a Task Force which they have created in response to the Finance Green Paper. It will look into how banks can support our economic recovery. Obviously, lending to SMEs is critical here and the Government is keen to hear their plans in this area.
When I sit around the policy table at national level with senior bankers, they always give a very clear message that banks are lending to SMEs. Yet when I talk to cdfa’s 70 members from all around the UK, they tell a very different story. Demand has risen dramatically, they say, and banks are not lending to SMEs. So, who is right? My guess is that they both are – but we are looking at the situation from different perspectives. Both CDFIs and banks want to lend to viable businesses, that’s a given. But I believe that banks have changed their view of what a viable business looks like. In other words, they have raised the bar and become more risk averse than ever. This has left a whole host of SMEs bereft of the finance they need to grow, at a time when the UK needs its SMEs to thrive like never before.
CDFIs, as specialist intermediaries are well placed to step into this gap but need more capital to on-lend and more revenue support to develop their capacity to respond appropriately to this market failure. The obvious way to solve this dilemma is for the banks to support CDFIs so that they can continue to develop strong and sustainable local economies. If banks work through CDFIs, who know this market well, they will be able to reach and develop new markets as will as rehabilitate their tarnished reputation.
It’s a win-win situation. Let’s make it happen.
Bernie Morgan, Chief Executive, cdfa